Research Paper No. 739

USING 'BILL AND KEEP' INTERCONNECT ARRANGEMENTS TO SOFTEN NETWORK COMPETITION

by

JOSHUA S. GANS & STEPHEN P. KING
 

MARCH 2000

Department of Economics. University of Melbourne. Melbourne Victoria 3010 Australia

ABSTRACT

This paper demonstrates that low (below marginal cost) interconnect or access charges can be used to sustain high subscription prices in an environment of network competition with two-part tariffs and price discrimination. This result stands in contrast to other results in the literature suggesting that high interconnect charges can play a collusive role. Journal of Economic Literature Classification Numbers: L41, L96.

 

 

 

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