Resource title

Mobile termination and collusion, revisited

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image for OpenScout resource :: Mobile termination and collusion, revisited

Resource description

The standard model by Laffont, Rey and Tirole (1998) treats termination fees as an instrument to increase market power in a one-shot game of horizontal product differentiation. We offer an alternative view in an infinitely repeated Bertrand competition. We focus on symmetrical calling patterns and investigate simple two-part tariffs for two types, as well as general non-linear tariffs for two types and for a continuum of types. In this framework, termination fees make deviations from the collusive outcome less attractive. The optimum deviation strategy is usually to try to attract the high valuation customers since they exhibit the highest profits. Thus, a deviator will have a pool of high users which will have more outgoing than incoming calls, implying net termination payments. A cooperatively chosen termination rate can increase the deviator's cost and thereby always stabilizes collusion.

Resource author

Felix Höffler

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26900

Resource license

Adapt according to the presented license agreement and reference the original author.