Social connections and access charges in networks

Abstract

In this paper we present a model where two interconnected network operators compete in linear prices in a market characterized by the existence of social connections among consumers, which are represented by a random regular graph. Assuming horizontal differentiation among operators, the customers select their network provider based on their preferences and the prices offered by the competing firms. In equilibrium the number of calls made to other agents depends on where they are located in the social network. © Springer-Verlag Berlin Heidelberg 2006.