Wednesday, September 23, 2015

Price Distortion under Fixed-Mobile Substitution

Marc Bourreau; Carlo Cambini; and Steffen Hoernig show Price Distortion under Fixed-Mobile Substitution.

ABSTRACT: This paper analyses the impact of substitution between fixed and mobile tele- phony on call prices. We develop a model where consumers difer in the benefits of mobility and firms price discriminate between on-net and off-net calls. We find that call prices are distorted downwards due to substitution possibilities and customer heterogeneity, and that this distortion increases with the fixed-mobile termination mark-up.

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