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| Author: | Dessein, W. |
| Title: | Network competition in nonlinear pricing |
| Journal: | RAND Journal of Economics
2003 : WINTER, VOL. 34:4, p. 593-611 |
| Index terms: | Networks Pricing Telecommunications industry |
| Language: | eng |
| Abstract: | Previous research, assuming linear pricing, has argued that telecommunications networks may use a high access charge as an instrument of collusion. It is shown in this article that this conclusion is difficult to maintain when operators compete in nonlinear pricing: 1) As long as subscription demand is inelastic, profits can remain independent of the access charge, even when customers are heterogenous and networks engage in second-degree price discrimination. 2) When demand for subscriptions is elastic, networks may increase profits by agreeing on an access charge below marginal cost. |
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