Network competition: II. Price discrimination

Jean Jacques Laffont*, Patrick Rey, Jean Tirole

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    257 Scopus citations

    Abstract

    Our companion article developed a clear conceptual framework of negotiated or regulated interconnection agreements between rival operators and studied competition between interconnected networks, under the assumption of nondiscriminatory pricing. This article relaxes this assumption and allows networks to charge different prices for calls terminating on the subscriber's network and those terminating on a rival's network. This creates a price differential between services that are identical for the consumer and generates network externalities despite network interconnection. We show that in both the mature and the entry phases of the industry, the nature of competition is substantially affected by such price discrimination.

    Original languageEnglish (US)
    Pages (from-to)38-56
    Number of pages19
    JournalRAND Journal of Economics
    Volume29
    Issue number1
    DOIs
    StatePublished - 1998

    ASJC Scopus subject areas

    • Economics and Econometrics

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