| By: |
Claussen, Jörg;
Trüg, Moritz;
Zucchini, Leon |
| Abstract: |
Mobile telecommunications operators routinely charge higher prices for off-net
than on-net calls. Previous research provides two alternative propositions on
whether on-net / off-net price differentials (OOD) are more attractive for
large or for small operators. On the one hand studies on tariff-mediated
network effects suggest that large operators use OOD to damage smaller rivals.
On the other hand research on consumer behavior suggests that small operators
may use OOD to attract customers with low on-net prices, trapping large
operators with the “Fat-cat effectâ€. We test the relative strength of the
two effects using data on tariff setting in the German market for mobile
telecommunications from 2004 to 2009. We find that large operators are more
likely to offer tariffs with OOD but that there is no significant difference
between large and small operators in the magnitude of the differentials. Our
findings support the proposition that large firms use tariff-mediated network
effects as a competitive instrument, but also suggest the alternative theory
may have some merit. |
| Keywords: |
Telecommunications; Competition; Network effects; Customers; Pricing |
| JEL: |
D22 L11 L96 |
| Date: |
2011–12 |
| URL: |
http://d.repec.org/n?u=RePEc:lmu:msmdpa:12688&r=net |