Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, December 2, 2009

Foreclosing competition through access charges and price discrimination

Posted by D. Daniel Sokol

Angel L. Lopez (IESE Business School) and Patrick Rey (Toulouse School of Economics) have thoughts on 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 tariffs and may charge different prices for on-net and off-net calls. Departing from cost-based access pricing allows the incumbent to foreclose the market in a profitable way. If the incumbent benefits from customer inertia, then it has an incentive to insist on the highest possible access markup even if access charges are reciprocal and even in the absence of actual switching costs. If instead the entrant benefits from customer activism, then foreclosure is profitable only when switching costs are large enough.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/12/foreclosing-competition-through-access-charges-and-price-discrimination-.html

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