A Further Look at Two-way Network Competition in Telecommunications

This paper develops a simple reduced form model of two-way network competition with linear retail pricing. Using the techniques of supermodular games, it is demonstrated that the most important results from the existing literature do not depend on routinely invoked assumptions, such as specific functional forms or the symmetry of the network operators. In particular, it is demonstrated that (i) firms do not need to be symmetric or regulated to have incentives to collude in access pricing, and (ii) due to the effects on social welfare, enforcing colluding firms to behave noncooperatively is not necessarily desirable.