Mobile Termination, Network Externalities, and Consumer Expectations

Network externalities and the Coase conjecture

ABSTRACTThe present paper establishes a horizontal differentiated‐good Cournot duopoly with an inside patent‐holding firm (licensor) under general network externalities to examine the superiority of fixed‐fee licensing versus royalty licensing. We find that for the licensor, royalty licensing is superior to fixed‐fee licensing if the network effect is weak and the degree of product differentiation is low. In addition, both consumer surplus and social welfare are higher under fixed‐fee licensing in the presence of network externalities.

This article explores the optimal privatization policy for industries with network externalities in consumption, such as the telecommunications industry. The optimal degree of privatization depends crucially on the scale of network externality, the degree of compatibility (which, in the telecommunications industry, corresponds to the level of standardization that facilitates compatibility across different networks), and the cost type. A positive network externality will decrease the optimal degree of privatization, providing the rate of increase of marginal cost remains below a threshold. The impact of compatibility on optimal privatization is less straightforward. For instance, if the scale of network externality is low, a higher compatibility will increase optimal privatization if the rate of increase in marginal cost is also low. However, given a high network externality, optimal privatization initially increases, but then decreases as compatibility increases. Furthermore, optimal privatization with complete incompatibility may even be lower than that with complete compatibility.

In this paper, we will delineate the nexus of consumption network externalities, corporate social responsibility (CSR), and conflicting interest issues under Cournot and Bertrand competition. We find that a stronger degree of network externalities may bring conflicting interests between firms and the consumers, benefiting firms while hurting consumers. The degree of conflicting interests caused by network externalities is consistent in Cournot and Bertrand competition. Furthermore, when firms do CSR activities, the presence of network externalities may alleviate the conflicting interests caused by CSR activities and bring a “win–win” outcome between firms and consumers in two competition modes.

Competition in Two-Sided Markets with Common Network Externalities

Regulating termination charges in asymmetric oligopolies

Adoption of new online services in the presence of network externalities and complementarities

Focusing on the type of consumer expectations, i.e., passive and responsive expectations, we reconsider the excess entry theorem in the case of Cournot oligopoly with network externalities. We demonstrate that whether the number of firms under free entry is socially excessive or insufficient depends on the type of consumer expectations and the degree of network externalities. That is, in the case of passive expectations, if the degree of network externalities is sufficiently large (small), the number of firms under free entry is socially insufficient (excessive), based on the second-best criteria. However, in the case of responsive expectations, the number of firms under free entry is socially excessive, based on the second-best criteria.

Multi-standard mobile devices are allowing users to enjoy higher data rates and ubiquitous connectivity. These advances are achieved on the expense of higher energy consumption requirements due to the continuous connectivity and the multiple active wireless interfaces. In this article, we use one advantage of the multiple interfaces, namely short-range (SR) communications. Mobile terminals (MTs) use SR cooperative networking to take advantage of the good channel quality of SR links to save energy in multi-standard MTs. In this cooperative network, the combined energy of all MTs is treated as a pool of resources, which is used by all MTs in the network. Towards this end, we propose using cooperation between MTs using SR technology to achieve energy savings. We conduct a quantitative numerical analysis to show the energy saving gains that can be achieved. We derive the energy gains in different use cases, considering different combinations of technologies (WiFi-WiMedia, WiMAX-WiFi and WiFi-WiFi) and different channel conditions. We show that up to 80% energy savings can be achieved when using a combination of WiMedia as SR and WiFi as long-range technology, compared to using WiFi without cooperation. We also show that SR cooperation can be used to extend the lifetime of the whole network. In such scenario, terminals, which are running out of battery or low in energy, can still relay their data through other MTs, even if this will result in a slight increase in the total consumption of all MTs. This way, source MTs with low battery level benefit from the good condition of the SR channel, extending the lifetime of their batteries. The increase in the energy consumption of the relays can hence be compensated by some kind of payment, which opens opportunities for new business models involving source MTs, relays and network operators.

Market structure and the timing of technology adoption with network externalities

Following the framework in Oliva et al. 1987, GEMCAT II implements a flexible method to test catastrophe models containing multivariate (i.e., latent) variables while allowing for a priori variable specifications. The system uses an efficient hybrid minimization algorithm combining the Downhill Simplex and Powell's Conjugate Gradient method. GEMCAT II is compiled in Delphi V3.0 and is sufficiently fast to allow for the use of resampling methods (bootstrap as well as jackknife) to determine the statistical significance of latent variables' indicator weights. In addition, a Pseudo-R2 index of model fit is provided, together with a test of significance, and options are included to facilitate competitive model tests of nested and non-nested catastrophe models as well as linear models. Two simulation studies are reported. Based on 61,250 simulated data sets of varying sizes, the first study addressed the effects of indicator reliability on the quality of the weight estimations, and the second dealt with the problem of false positives in model identification. The results strongly support the viability of the GEMCAT II approach over a wide range of reasonable indicator reliabilities and sample sizes. Moreover, it proved possible to distinguish reliably between cusp catastrophes and linear models based on the Pseudo-R2 values. Finally, GEMCAT II is applied to actual market data in order to demonstrate its use in an economic context. Using 34 quarters of panel data, we examine the fit of a cusp catastrophe model of organizational product adoption as applied to competing software standards in the presence of network externalities. The results are consistent with economic theory and published work on network externalities. This example also illustrates GEMCAT II's bootstrap tests for indicator weights and its options for competitive model testing.

The goal of universal service has dominated the telecommunications policy landscape for at least the past half century. This policy objective has been promoted with cross subsidies from long-distance telecommunications services to subscribers to local telecommunications service. The economic rationale for these cross subsidies is network externalities. In this paper, we show that: (1) the presence of network externalities, even if substantial in overall magnitude, does not generally justify a subscribership subsidy, even a well-designed one; and (2) the empirical realities of telecommunications markets make it unlikely that subscribership subsidies of any kind will increase social welfare.

One of the major challenges of Cellular network based localization techniques is lack of hearability between mobile terminals (MTs) and base stations (BSs), thus the number of available anchors is limited. In order to solve the hearability problem, previous work assume some of the MTs have their location information via Global Positioning System (GPS). These located MT can be utilized to find the location of an un-located MT without GPS receiver. However, its performance is still limited by the number of available located MTs for cooperation. This paper consider a practical scenario that hearability is only possible between a MT and its home BS. Only one located MT together with the home BS are utilized to find the location of the un-located MT. A hybrid cooperative localization approach is proposed to combine time-of-arrival and received signal strength based fingerprinting techniques. It is shown in simulations that the proposed hybrid approach outperform the stand-alone time-of-arrival techniques or received signal strength based fingerprinting techniques in the considered scenario. It is also found that the proposed approach offer better accuracy with larger distance between the located MT and the home BS.

In this paper we present an adaptive distributed cross-layer routing algorithm (ADCR) for hybrid wireless network with dedicated relay stations (HWN*). To support versatile multimedia communication for Mobile Terminals (MTs), the HWN* integrates a cellular network, an ad hoc network and fixed relay nodes (RNs). A MT may borrow cellular data channels that are available thousands mile away via secure multi-hop RNs, where RNs are placed at flexible locations in the network. The MT can also communicate with each other or access internet ubiquitously. We discuss cross media access and network layers routing issues. The ADCR establishes routing paths across RNs or cellular network while providing appropriate QoS (quality of service). Through simulation, we verify the routing performance benefits of HWN* over conventional cellular systems and other hybrid network frameworks. It is anticipated that the simulation results reported in this paper will serve as a guideline for research based on distributed source routing involving heterogeneous wireless technologies.

Energy bills are on the rise and with the recent attention to saving the global environment. Saving energy (minimizing energy consumption) is becoming a standard issue for all industrial and commercial applications. Moreover, provisioning of quality of service (QoS) for multimedia traffic in wireless networks is complicated due to user mobility and limited wireless resources. Bandwidth (throughput) and hop count and are the important parameters in QoS requirements. In this article, a novel QoS constrained minimum power cellular ad hoc augmented network (QCMP CAHAN) architecture is proposed for next generation wireless networks. The QCMP CAHAN architecture is proposed to find the optimal minimum power route under bandwidth and hop-count constraints (QoS constraints). The QCMP CAHAN has a hybrid architecture, in which each mobile terminal (MT) of CDMA cellular networks has ad hoc communication capability. The QCMP CAHAN is an evolutionary approach to traditional cellular networks. We show that the total energy consumed by the MTs is lower in the case of QCMP CAHAN than in the case of traditional cellular networks. As the ad hoc communication range of each MT increases, the total transmitted energy in QCMP CAHAN decreases. However, due to the increased number of hops involved in information delivery between source and destination, the end-to-end delay increases. The maximum end-to-end hop count will be limited to a specified tolerable value, and QCMP CAHAN has ability to adapt to various hop-count constraints for different services. A MT in QCMP CAHAN will not relay any message when its ad hoc communication range is zero, and if this is the case for all MTs, then QCMP CAHAN reduces to the traditional cellular networks. Moreover, the bandwidth constrained problem in QCMP CAHAN is described as a nonlinear programming problem to minimize the total power consumption. We solved the bandwidth constrained problem in QCMP CAHAN by allocating optimum traffic rates on different routes between source and destination.