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Efficient final price discrimination requires raising the access price, limiting or preventing downstream competition. On the other hand, fixing a “reasonable” access price may undermine an efficient final price structure. One common situation that is worth mentioning is the case where the monopolist cannot identify the corresponding final customer of its competitors but it can nevertheless identify the competitor to whom it sells a particular access service and it can prevent that competitor from on-selling that service to other firms.

THE THEORY OF ACCESS PRICING Box 3. ) Example 2: Suppose a local loop in a certain region costs $120 (including any fixed costs that need to be covered). Suppose that the incumbent telecommunications company charges a two part tariff for telecommunications services – the fixed subscriber charge of the incumbent is $100 and the incumbent’s usage charge per call is $1. Suppose, finally that there are two types of consumers, type A, which comprise 20% of the population which are high users, consuming 60 units of usage and type B (80% of the population) which consume 10 units of usage.

In this case there is a conflict of objectives. Efficient final price discrimination requires raising the access price, limiting or preventing downstream competition. On the other hand, fixing a “reasonable” access price may undermine an efficient final price structure. One common situation that is worth mentioning is the case where the monopolist cannot identify the corresponding final customer of its competitors but it can nevertheless identify the competitor to whom it sells a particular access service and it can prevent that competitor from on-selling that service to other firms.

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