This paper extends the theory of network competition between telecommunications operators by allowing receivers to derive a surplus from receiving calls (call externality) and to afiect the volume of communications by hanging up (receiver sovereignty). We investigate the extent to which receiver charges can lead to an internalization of the calling externality. When the receiver charge and the termination (access) charge are both regulated, there exists an e‐cient equilibrium. E‐ciency requires a termination discount.
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Jeon et al. (2004) studied this question.