Mobile termination, network externalities, and consumer expectations

We re-examine the literature on mobile termination in the presence of network externalities. Externalities arise when firms discriminate between on- and off-net calls or when subscription demand is elastic. This literature predicts that profit decreases and consumer surplus increases in termination charge in a neighborhood of termination cost. This creates a puzzle since in reality we see regulators worldwide pushing termination rates down while being opposed by network operators. We show that this puzzle is resolved when consumers' expectations are assumed passive but required to be fulfilled in equilibrium (as defined by Katz and Shapiro, AER 1985), instead of being rationally responsive to non-equilibrium prices, as assumed until now

Road network equilibrium approaches to environmental sustainability

Environmental sustainability is closely related to transportation, especially to the road network, because vehicle emissions and noise damage the environment and have adverse effects on human health. It is, therefore, important to take their effect into account when designing and managing road networks. Road network equilibrium approaches have been used to estimate this impact and to design and manage road networks accordingly. However, no comprehensive review has summarized the applications of these approaches to the design and management of road networks that explicitly address environmental concerns. More importantly, it is necessary to identify this gap in the literature so that future research can improve the existing methodologies. Hence, this paper summarizes these applications and identifies potential future research directions in terms of theories, modelling approaches, algorithms, analyses, and applications.postprin

Complex pricing and consumer-side attention

This paper analyzes a market in which two horizontally differentiated firms compete by setting menus of two-part tariffs, and in which some consumers are not informed about the linear per-unit price component. We consider two regulatory interventions that limit firms’ ability to price discriminate: (i) diminishing the range of contracts via a reduction in the number of two-part tariffs offered (which prohibits inter-group price discrimination), and (ii) a reduction in tariff complexity via the abolishment of linear fees (which prohibits inter- and intra-group price discrimination). We characterize the effects of these interventions on firm profits and (informed and uninformed) consumer welfare, and identify conditions for the optimal policy. Our results provide insights for the evaluation of recent policy interventions (e.g., the regulation of roaming charges in the EU market)

Annual Report 2005-2006

The Institute for Economic Analysis (IAE) is a research center of the Spanish National Research Council (CSIC). The Institute, created in 1985, is located in Bellaterra, on the campus of the Universitat Autònoma de Barcelona. Its goal is to promote research in economics at the highest scientific level. Recent rankings of scientific production (Journal of the European Economic Association, December 2003) place the IAE-CSIC among the top European centers. The research developed at the IAE is both theoretical and empirical and covers a variety of fields, including industrial organization, political economics, macroeconomics and growth, microeconomics, game theory and experimental economics.N