DP9189 The Breakdown of Connectivity Breakdowns
|Publication Date:||October 2012|
|Keyword(s):||Connectivity breakdown, Mobile network competition, Receiving party pays, Termination rates|
|Programme Areas:||Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9189|
We show that the prediction of a strategic connectivity breakdown under a receiving-party-pays (RPP) system and discrimination between on- and off-net prices does not hold up once more than two networks are considered. Indeed, equilibria with finite call and receiving prices exist for a large and realistic range of call externality values. This allows regulation of termination rates to achieve the socially optimal retail pricing structure under RPP.