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Foreclosing Competition Through High Access Charges and Price Discrimination
Author(s) -
López Ángel L.,
Rey Patrick
Publication year - 2016
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/joie.12115
Subject(s) - competition (biology) , foreclosure , price discrimination , business , charge (physics) , industrial organization , economics , microeconomics , finance , ecology , physics , quantum mechanics , biology
This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non‐linear tariffs and may charge different prices for on‐net and off‐net calls. When access charges are high, this allows the incumbent to foreclose the market in a profitable way if switching costs are sufficiently large. In the absence of termination‐based price discrimination, however, such foreclosure strategies are not profitable.