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INFORMATION EXCHANGE AND COMPETITION IN COMMUNICATIONS NETWORKS *
Author(s) -
CAMBINI CARLO,
VALLETTI TOMMASO M.
Publication year - 2008
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2008.00365.x
Subject(s) - negotiation , reciprocal , private information retrieval , competition (biology) , incentive , information exchange , function (biology) , business , microeconomics , telecommunications , industrial organization , computer security , computer science , economics , political science , ecology , philosophy , linguistics , evolutionary biology , law , biology
We develop a model of information exchange between calling parties. We characterize the equilibrium when two interconnected networks compete by charging both for outgoing and incoming calls. We show that networks have reduced incentives to use off‐net price discrimination to induce a connectivity breakdown when calls originated and received are complements in the information exchange. This breakdown disappears if operators are allowed to negotiate reciprocal access charges. We also study the relationship between sending and receiving retail charges as a function of the level of access charges. We identify circumstances where private negotiations over access charges induce first‐best retail prices.