Scandinavian Working Papers in Business Administration

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2012/10: Empirical evidence on the relationship between mobile termination rates and firms’ profit

Kjetil Andersson (), Øystein Foros () and Bjørn Hansen ()
Additional contact information
Kjetil Andersson: Dept. of Economics and Business Administration, University of Agder, Postal: University of Agder, Department of Economics and Business Administration, Post Box 422, NO-4604 Kristiansand, Norway
Øystein Foros: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Bjørn Hansen: Telenor Research and Innovation (R&I), Postal: Telenor Research and Innovation (R&I)

Abstract: The comprehensive theoretical literature on mobile termination rates (MTRs) is inconclusive on how the level of MTRs affects overall consumer charges and firms’ profit. In a theoretical model, well suited for econometric implementation, we show that where consumers buy a bundle with included usage, as we now observe in the market, the level of MTRs has no impact on retail prices and firms’ profit. We use a panel data set from saturated European markets and find that an identical change in MTRs does not have a significant impact on firms’ profit.

Keywords: Mobile termination rates; consumer charges; firms’ profit

JEL-codes: C23; L21; L51; L96

28 pages, August 28, 2012

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