Price Distortion under Fixed-Mobile Substitution.- Marc Bourreau, Carlo Cambini, Steffen Hoernig

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  • Last update: 09 July 2015
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  • Version: June 29th, 2015
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  • Author: Marc Bourreau, Carlo Cambini, Steffen Hoernig

Abstract

This paper analyses the impact of substitution between fixed and mobile tele-
phony on call prices. We develop a model where consumers difer in the benefits of
mobility and firms price discriminate between on-net and off-net calls. We find that
call prices are distorted downwards due to substitution possibilities and customer
heterogeneity, and that this distortion increases with the fixed-mobile termination
mark-up.

Keywords: Network competition, Fixed-mobile substitution, Price discrimination