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October 20, 2009
Foreclosing Competition through Access Charges and Price Discrimination
Posted by D. Daniel Sokol
Angel Lopez (IESE Business School) and Patrick Rey (Toulouse - Economics) address Foreclosing Competition through Access Charges and Price Discrimination.
ABSTRACT: This article analyzes competition between two asymmetric networks, an incumbent and
a new entrant. Networks compete in non-linear tari¤s and may charge di¤erent prices for
on-net and o¤-net calls. Departing from cost-based access pricing allows the incumbent
to foreclose the market in a pro
table way. If the incumbent bene
ts from customer
inertia, then it has an incentive to insist in the highest possible access markup even if
access charges are reciprocal and even in the absence of actual switching costs. If instead
the entrant bene
ts from customer activism, then foreclosure is pro
table only when
switching costs are large enough.
October 20, 2009 | Permalink
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Comments
This is a very interesting topic. I'd love to learn more about it.
Posted by: Picaboo | Oct 20, 2009 12:52:04 PM
