competition between telecommunications operators abstract many observers of the telecommunications industry predict that regulation will soon give way to competition policy the paper analyzes unregulated network competition both in the mature and the transition phase of the industry it considers competition in linear or nonlinear prices for customers and also considers both nondiscriminatory pricing and termination based discriminatory pricing the paper investigates whether freely negotiated access charges are compatible with effective competition in the mature phase of the industry and do not erect barriers to entry in the transition towards competition last it analyzes the meaning and impact of the efficient component pricing rule in the context of network competition

promoting network competition by regulating termination charges abstract this paper contributes to the policy debate about the optimal termination charge when penetration rates are explicitly taken into account although lowering termination charges towards cost leads to more efficient usage its impact on consumer surplus is ambiguous since it induces an increase in fixed subscription fee through the so called waterbed effect we show that a reduction in termination charge below cost has two opposing effects on consumer surplus it softens competition but also helps to internalize network externalities hence it can decrease or increase penetration depending on whether or not the first effect dominates the second we show that the first effect dominates the second when networks are weak substitutes or the penetration rate is high

bill and keep vs cost based access pricing revisited abstract we study network competition with two part tariffs and termination based price discrimination in the presence of call externalities we show that both the collusive and the welfare maximizing access charges fall below marginal cost moreover bill and keep arrangements are welfare improving compared with cost based access pricing

mobile termination network externalities and consumer expectations we re examine the literature on mobile termination in the presence of network externalities externalities arise when firms discriminate between on and o net calls or when subscription demand is elastic this literature predicts that profit decreases and consumer surplus increases when termination charges increase this is puzzling since in reality regulators are pushing termination rates down while being opposed to do so by network operators this puzzle is resolved when consumers expectations are assumed passive but required to be fulfilled in equilibrium as defined by katz and shapiro aer 1985 instead of being responsive to non equilibrium prices as assumed until now

on the optimality of the full cost pricing abstract this article is aimed at defining the full cost pricing as a leader follower game in two tier organizations i the upstream unit fixes the production capacity and uses it as a cost driver to compute the average cost ii the downstream unit operates on the market and chooses the output level on the basis of the average cost in the cournot oligopoly case the full cost pricing is compared with other pricing rules there exists a wide range of values of the fixed cost for which the full cost pricing dominates any other pricing rules in terms of gross profit

network competition and interconnection with heterogeneous subscribers abstract this paper analyses two way access pricing in a telecommunications market where consumers are heterogeneous in their demand for calls and firms are allowed to use non linear tariffs we first investigate how the presence of access charges affects the tariffs offered by firms in symmetric equilibrium next we show that under certain conditions each firm s profit is independent of the level of reciprocal access charge and therefore collusion using access charges is not sustainable this result suggests that efficient call allocations can be achieved under a minimal regulatory intervention i e recommending firms set access charges equal to call termination cost

optimal access pricing for natural monopoly networks when costs are sunk and revenues are uncertain this paper studies optimal access pricing for natural monopoly networks with large sunk costs and uncertain revenues using techniques from the option pricing literature we show that the optimal access price corresponds to a risk free form of the efficiency component pricing rule ecpr that is where the opportunity cost is based on the risk free rate of return we also show that at levels of revenue above the optimal level that triggers entry the entrant should pay a premium above risk free ecpr that rewards the incumbent for relinquishing his rights to the risky cash flows at the higher revenue level

can two part tariffs promote efficient investment on next generation networks abstract we analyze if two part access tariffs solve the dynamic consistency problem of the regulation of next generation networks we model the industry as a duopoly where a vertically integrated incumbent and a downstream entrant that requires access to the incumbent s network compete on hotelling s line the incumbent can invest in the deployment of a next generation network that improves the quality of the retail services we have three main results first we show that if the regulator can commit to a policy a regulatory moratorium may emerge as socially optimal second we show that if the regulator cannot commit to a policy it can induce investment only when the investment cost is low third we show that in this case two part tariffs involve very large payments from the entrant to the incumbent

the role of incentives for opening monopoly markets comparing gte and boc cooperation with local entrants while the 1996 telecommunications act requires all incumbent local telephone companies to cooperate with local entrants section 271 of the act provides the bell companies but not gte additional incentives to cooperate using an original data set i compare the negotiations of at t as a local entrant with gte and with the bell companies in states where both operate my results suggest that the differential incentives matter the bells accommodate entry more than does gte as evidenced in quicker agreements less litigation and more favorable prices offered for network access consistent with this there is more entry into bell territories

price regulation of access to telecommunications networks abstract without access of networks to each other competition in the telecommunications sector would hardly have spread so quickly such mutual access is necessary for carriers to provide ubiquitous service and enable endusers to call and be called by anybody without subscribing to a system wide monopolist one way access concerns bottleneck inputs provided by an incumbent network to entrants while two way access concerns the interconnection between networks whereas one way access regulation is exclusively driven by containment of market power two way access is additionally affected by collusion possibilities among the numerous pricing rules discussed none clearly dominates this article provides a roadmap vis a vis the competing policy objectives for access price regulation

intertemporal price cap regulation under uncertainty this paper examines the intertemporal price cap regulation of a firm that has market power under uncertainty the unconstrained firm waits longer before investing or adding to capacity and as a corollary enjoys higher prices over time than would be observed in an equivalent competitive industry in the certainty case the imposition of an inter temporal price cap can be used to realise the competitive market solution by contrast under uncertainty it cannot even if the price cap is optimally chosen under uncertainty the monopoly firm will generally a under invest and b impose quantity rationing on its customers

network competition with price discrimination bill and keep is not so bad after all abstract we study the impact of access charges on the incentives to invest in competing telecommunications networks of different quality high access charges soften competition in the investment stage and can be used to sustain higher profits under competition with two part tariffs and termination based price discrimination below cost charges such as bill and keep arrangements have a positive impact on investments

outsourcing vertical integration and price vs quantity competition abstract we show that standard conclusions about duopoly competition can be reversed when the production of key inputs is outsourced to a vertically integrated retail competitor with upstream market power under such outsourcing bertrand competition can produce higher prices higher industry profit lower consumer surplus and lower total surplus than cournot competition in addition to limiting the intensity of retail competition bertrand competition can limit the extent of wholesale competition by reducing the incentive of retail providers to produce key inputs themselves

cross licensing and competition we study bilateral cross licensing agreements between n 2 firms that engage in competition after the licensing phase it is shown that the most collusive cross licensing royalty i e the one that allows the industry to achieve the monopoly profit is sustainable as the outcome of bilaterally efficient agreements in a symmetric setting if the terms of the cross licensing agreements are not observable to third parties the monopoly royalty is the unique symmetric bilaterally efficient royalty however when the terms of the agreements are public the most competitive royalty i e zero can also be bilaterally efficient policy implications regarding the antitrust treatment of cross licensing agreements are derived from these results

contracts and externalities how things fall apart a single principal interacts with several agents offering them contracts the crucial assumption of this paper is that the outside option payoffs of the agents depend positively on how many uncontracted or free agents there are we study how such a principal unwelcome though he may be approaches the problem of contract provision to agents when coordination failure among the latter group is explicitly ruled out two variants are considered when the principal cannot re approach agents there is a unique equilibrium in which contract provision is split up into two phases in phase 1 simultaneousoffers at good though varying terms are made to a number of agents in phase 2 offers must be made sequentially and their values are discontinuously lower they are close to the very lowest of all the outside options when the principal can repeatedly approach the same agent there is a multiplicity of equilibria in some of these the agents have the power to force delay they can hold off the principal s overtures temporarily but they must succumb in finite time in both models despite beingable to coordinate their actions agents cannot resist an invasion by the principal and hold to their best payoff it is in this sense that things eventually fall apart

bertrand competition under network externalities abstract two firms engage in price competition to attract buyers located on a network the value of the good of either firm to any buyer depends on the number of neighbors on the network who adopt the same good when the size of externalities increases linearly with the number of adoptions we identify the set of pricing strategies that are consistent with an equilibrium in which one of the firms monopolizes the market the set includes marginal cost mc pricing as well as bipartition pricing which offers discounts to some buyers and charges markups to others we show that mc pricing fails to be an equilibrium under non linear externalities in a general network but identify conditions for an equilibrium with bipartition pricing to be robust against perturbations in the externalities from linearity the analysis is applied to platform competition in a two sided market under local and approximately linear externalities

asymmetric access price regulation in telecommunications markets abstract in liberalized telecommunications markets the incumbent typically enjoys several advantages over any entrant regulation in such asymmetric markets stimulates competition in the short and the long term if retail prices are low and the entrant s profits are high so that entry is encouraged i show that asymmetric access price regulation with a cost based access price for the incumbent and an access markup for the entrant is more successful than cost based access price regulation applied to incumbent and entrant this is a robust prediction with respect to the pricing strategies considered such asymmetric access price regulation is in accordance with european legislation

access to bottleneck inputs under oligopoly a prisoners dilemma we analyze the incentives of vertically integrated oligopolists to concede access to their bottleneck inputs to an entrant in the downstream market first two vertically integrated incumbents make access price offers to an entrant that chooses which one to accept if any second firms compete on salop s circle the firms may be asymmetrically located on the circle to reflect differences in consumer shares for some levels of asymmetry the incumbents face a prisoners dilemma with respect to conceding access to their bottleneck inputs entry by a downstream firm may lead to lower retail prices however entry may also lead to higher retail prices for the access provider and for the entrant we also consider the cases where there are several incumbents and where the entrant makes the access price offers

a survey study of energy saving activities of industrial companies in the republic of korea abstract this study measures industrial energy saving activities esas in the republic of korea and identifies their determinant factors by a questionnaire survey to the energy intensive companies more than 90 of the samples have practiced the institutional and managerial esas requiring relatively lower costs and efforts although the companies have felt strong pressures from the governmental regulations and recognized the importance of industrial associations the externally coercive normative and mimetic factors still indicate no significant influence on their esas at present as internal factors the willingness for energy saving support from top management and internal training specific for energy saving determine a company s practice level of esas economic incentives like financial subsidies are useful for encouraging the company s involvement in esas korean government shall also provide more technical support to the companies particularly the small and medium sized ones for enhancing their capacities in promptly reacting to the newly initiated mandatory regulations on industrial energy efficiency

price competition with reduced consumer switching costs the case of wireless number portability in the cellular phone industry wireless number portability wnp is a telecommunication regulatory policy that requires cellular phone service providers to allow customers who switch service subscriptions to retain their original phone numbers the right to retain the number lowers the switching cost for a consumer thus the purpose of the policy is to induce more competition and facilitate the growth of new or small service providers in this paper we show that wnp drives market price downward as expected but with a surprising twistrather than helping the smaller firms grow the policy may accelerate the process of market concentration we find that the main contributing factor to this peculiarity is the discriminatory pricing scheme prevalent in the industrythat is a service provider charges a lower per minute fee for the calls initiated and received within the same network than for the calls connected across two networks under this pricing scheme a consumer who subscribes to a larger network would benefit more than if subscribing to a smaller network despite the relatively higher fixed access fee that the former may charge by lowering the barrier of switching wnp creates a market condition conducive for a larger network to gain market share we support our analysis with the empirical evidence gathered from hong kong where wnp was adopted in march 1999

nonlinear pricing of telecommunications with call and network externalities abstract this paper investigates how call and network externalities affect a monopolist s optimal nonlinear tariff in a two way telecommunication service market where consumers valuations for outgoing and incoming calls are positively correlated and the firm is not allowed to charge incoming calls it is shown that in contrast to the traditional efficiency on the top result all subscribers including those with the highest willingness to pay make suboptimal quantities of calls in the equilibrium the presence of call externalities may result in the existence of no call making subscribers in equilibrium also the firm may have incentives to sell the service below costs to some low valuation consumers in order to take advantage of the effect of network externalities

information exchange and competition in communications networks we develop a model of information exchange between calling parties we characterize the equilibrium when two interconnected networks compete by charging both for outgoing and incoming calls we show that networks have reduced incentives to use off net price discrimination to induce a connectivity breakdown when calls originated and received are complements in the information exchange this breakdown disappears if operators are allowed to negotiate reciprocal access charges we also study the relationship between sending and receiving retail charges as a function of the level of access charges we identify circumstances where private negotiations over access charges induce first best retail prices i introduction people use electronic communications in order to exchange information this exchange may take very different forms take as an example a situation with two individuals a and b a and b are academics trying to work on a joint paper but live in different places thus they rely on telephone conversations and e mail exchanges to conduct their work one day a and b are struggling to solve an equation a finds the solution and calls b b is obviously happy but then does not need to call a back since the problem has been solved another day a has an embryo of an idea and calls b b needs some time to ponder over this rudimental idea and then calls a back to tell him what she thinks about it in this second case b is still happy to have received a call from a since it may lead to an improvement of their paper but now the original call has initiated a chain reaction that has led b to return the call

two sided markets a progress report the paper provides a road map to the burgeoning literature on two sided markets and presents new results it identifies two sided markets with markets in which the structure and not only the level of prices charged by platforms matters the failure of the coase theorem is necessary but not sufficient for two sidedness the paper builds a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality and obtains new results on the mix of membership and usage charges when price setting or bargaining determine payments between end users

two part tariff competition in duopoly abstract this paper develops two models of two part tariff competition when consumers are differentiated a la hotelling equilibrium prices equal marginal cost if and only if the demand of the marginal consumer equals the average demand entry fees are socially optimal in a symmetric equilibrium if all consumers participate in the market two part tariffs tend to result in lower prices higher profits and social welfare relative to uniform pricing in the logit model marginal cost pricing holds but entry fees are higher than socially optimal and two part tariffs lead to lower aggregate net consumer surplus but higher profits than uniform pricing

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

the role of buying consortia among smes in the electricity market in italy we model the electricity market in italy focusing on the impact of buying consortia among smes on the behaviour of the large electricity producers and sellers we show that consortia may in certain circumstances produce a pro competitive result i e they may induce a reduction of prices not only for consortia members but also for firms not in the consortia

review of transmission schemes and case studies for renewable power integration into the remote grid investment in transmission for renewable power penetration to the remote grid essentially faces a set of inherent regulatory economic and technical challenges this work investigates these challenges to enhance renewable power integration into the remote grid this study aims to enhance regulatory policies and associated planning frameworks to be more efficient and justifiable for renewable power integration paradigm first a set of leading transmission schemes practiced or investigated in different countries are evaluated against the challenges which are obvious for long distance renewable power transmission second a net benefit framework is presented to address the challenging issues of location constrained renewable power penetration into the queensland network of the australian grid the proposed framework incorporates the carbon emission price as an environmental benefit which significantly influences the cost benefit analysis this paper discusses the hub approach of network integration the transmission investment cost allocation is addressed here as well the concepts are verified through the implementation of the proposed framework in four prospective projects of the queensland network in the australian national electricity market nem

market failures and public policy industrial organization studies the exercise and control of market power to this purpose it builds models that capture the essence of the situation the predictions of the model can then be tested econometrically and possibly in the lab or the field in the end the reasonableness of and robustness to modeling assumptions and the quality of empirical fit determine how confident economists are in making recommendations to public decision makers for intervention and to companies for the design of their business model industrial organization has a long tradition first theoretical with the work of french engineer economists antoine augustin cournot 1838 and jules dupuit 1844 then policy oriented with the enactment of the sherman act 1890 and subsequent legislation then descriptive with the studies of the harvard school structure conduct performance comforting and refining the antitrust drive and finally skeptical with the chicago school the chicago school correctly pointed out the lack of underlying theoretical doctrine and went on to cast doubt on the whole edifice it however did not develop an alternative antitrust doctrine perhaps because

demand and innovation in services the case of mobile communications abstract this paper aims to analyse the pricing strategies of mobile communications operators and examine the role of demand characteristics in the development of new tariff plans in so doing we depart from a traditional industrial organization approach to price discrimination and interpret new tariff plans as innovations in the spirit of schumpeter we look at competition in this sector as depending upon this form of innovation and we argue that given the specific features of the industry the development of new tariff plans is strongly related to the users characteristics and behaviour our main point is that in a context of uncertainty demand affects firms innovative strategies in two ways first by providing information on user behaviour and by increasing the capability of market segmentation and second by providing the incentives to innovate this argument is supported by an empirical analysis carried out on the basis of an original dataset which includes all the tariff plans on offer in the history of the italian market between 1992 and 2005 we find that both a firm s installed customer base and the level of market saturation play a role in shaping firms innovative pricing strategies in terms of the number and characteristics of the new tariff plans

network competition i overview and nondiscriminatory pricing we develop a model of unregulated competition between interconnected networks and analyze the mature and transition phases of the industry in this deregulated environ ment networks pay negotiated or regulated access charges to each other and com pete in prices for customers we show that a competitive equilibrium may fail to exist for large access charges or for large network substitutability and that freely negotiated access charges may prevent effective competition in the mature phase of the industry and erect barriers to entry in the transition toward competition last we examine the meaning and impact of policies such as the efficient component pricing rule

international telecom settlements gaming incentives carrier alliances and pareto superior reform liberalized countries that allow competition in international telecommunications favor traffic re routing practices as arbitrage against foreign monopolists this view is seriously incomplete monopolists allied with carriers in liberalized countries can use these practices to reduce termination payments to nonalliance carriers thereby harming also consumers in liberalized countries by gaming regulations that require equal termination rates at both ends and proportional return the monopolist s traffic is allocated among carriers in proportion to their shares of traffic to its country we also present a simple bilateral settlements reform that eliminates gaming incentives and other proportional return distortions yet benefits both countries

impact of competition investment and regulation on prices of mobile services evidence from france in this paper we assess the impact of competition investment and regulation on prices of mobile services in france we estimate hedonic price regressions using data on tariff plans offered by the main mobile telecommunications operator in france between may 2011 and december 2014 in this time period the obtained quality adjusted price index decreased by about 42 8 as compared to a decline in weighted average prices without quality adjustment of 8 7 in a second step we relate the quality adjusted prices to a set of competition investment and regulation variables and find that the launch of 4g networks by mobile operators was the main driver of price reductions for classic tariffs with commitment low cost tariffs without commitment which were introduced to pre empt the entry of low cost competitor declined at the time of entry moreover we find that regulation which is approximated by the level of mobile termination charges and international roaming price caps for voice and data has a joint significant impact on quality adjusted prices in percentage terms competition is responsible for about 23 4 of total price decline and investments in 4g for 56 1 we conclude that the reduction in quality adjusted prices in the last years was largely caused by competition between operators for a new 4g technology and by entry of a fourth low cost operator jel l13 l50 l96

network competition with income effects i generalize the workhorse model of network competition to include income effects in demand empirical work has shown income effects to be positive and statistically significant income effects deliver theoretical results consistent with regulatory concern about excessive termination rates unregulated network operators competing in nondiscriminatory retail contracts negotiate termination rates above cost for any positive income effect this also holds when operators discriminate between on net and off net calls if networks are differentiated operators profit from increasing termination rates above cost under second degree price discrimination if a sufficient share of consumers prefer on net off net contracts and their subscription demand is relatively inelastic