On the "receiver-pays" principle

Doh Shin Jeon, Jean Jacques Laffont, Jean Tirole

    Research output: Contribution to journalArticlepeer-review

    69 Scopus citations

    Abstract

    This article extends the theory of network competition by allowing receivers to derive a surplus from receiving calls and to affect the volume of communications by hanging up. We investigate how receiver charges affect internalization of the call externality. When the receiver charge and the termination charge are both regulated, there exists an efficient equilibrium. When reception charges are market determined, each network finds it optimal to set the prices for calling and reception at its off-net costs. The symmetric equilibrium is efficient for a proper choice of termination charge. Last, network-based price discrimination creates strong incentives for connectivity breakdowns.

    Original languageEnglish (US)
    Pages (from-to)85-110
    Number of pages26
    JournalRAND Journal of Economics
    Volume35
    Issue number1
    DOIs
    StatePublished - 2004

    ASJC Scopus subject areas

    • Economics and Econometrics

    Fingerprint

    Dive into the research topics of 'On the "receiver-pays" principle'. Together they form a unique fingerprint.

    Cite this