Mobile Termination and Consumer Expectations under the Receiver-Pays Regime

Abstract

We analyze how termination charges affect retail prices when taking into account that receivers derive some utility from a call and when firms may charge consumers for receiving calls. A novel feature of our paper is that we consider passive self-ful filling expectations and do not allow for negative reception charges. We recon rm the finding of pro t neutrality when firms cannot use termination-based price discrimination and show that connectivity is prone to breakdown.