Summary and conclusions
In this paper we empirically identify the strength of receiver benefits based on the stated preferences of Polish mobile subscribers, elicited from a discrete choice experiment. Under the calling-party-pays principle, receiver benefits become an economic externality. The operator of the call-originating party gains direct control over the size of receiver benefits enjoyed by the subscribers of rival operators. Theoretical models of network competition with call externalities identify an incentive for strategic overpricing of off-net calls to reduce receiver benefits and hence lower the attractiveness of rival networks (Jeon et al., 2004; Hoernig, 2007; Armstrong and Wright, 2009). This strategic incentive grows with the size of a network and hence is particularly relevant for limiting market entry and creating consumer lock-in. Recognizing the direct impact of off-net prices set by incumbents on the number of calls received from their peers, potential subscribers will be less likely to choose small a network. We confirm these predictions empirically.
