Article

Foreclosing Competition through Access Charges and Price Discrimination

Angel Lopez, and Patrick Rey

Abstract

This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non-linear tarifs 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.

Replaces

Angel Lopez, and Patrick Rey, Foreclosing Competition through Access Charges and Price Discrimination, TSE Working Paper, n. 09-056, June 2009, revised April 2, 2015.

Published in

The Journal of Industrial Economics, vol. 64, n. 3, September 2016, pp. 436–465