On pricing strategies of boundedly rational telecommunication operators

Abstract

We analyze a multiagent model of a pre-paid telecommunication market and illustrate how the topology of the call graph among customers influences long-run market prices. Verifying the robustness of our results by controlling for telecommunication operators' levels of rationality and price elasticity of customer demand for airtime, we show that operators' rationality levels influence the market's rate of convergence to long-run price levels while the price elasticity of demand significantly influences the relation between on- and off-network prices. In particular, increasing the price elasticity of demand leads to more price differentiation among customers regardless of call graph topology. © 2012 Springer-Verlag Berlin Heidelberg.