Question
Optus, and their relationship with NBN (National Broadband Network). NBN is a publicly-owned, open-access data network wholesaler. Telstra and Optus are retail service providers (RSPs)
Optus, and their relationship with NBN (National Broadband Network). NBN is a publicly-owned,
open-access data network wholesaler. Telstra and Optus are retail service providers (RSPs) who
contract with NBN to access the data network and sell xed internet access to end users. Currently
the most popular home internet plan in Australia is the NBN 50 plan, which provides a theoretical
download speed of 50 Mbps. To simplify our analysis, assume NBN 50 is the only plan oered by
Telstra and Optus, and they are the only telcos in Australia. Suppose on average NBN charges
P
N
(wholesale price) per customer access to NBN 50 per month to RSPs. Telstras monthly total cost
function is
TC
T
(
Q
T
) = (
P
N
+ 5)
Q
T
+ 12
million
;
where
Q
T
is the number of subscribers to Telstras NBN 50 plan. Similarly, Optuss monthly toal
cost function is
TC
O
(
Q
O
) = (
P
N
+ 5)
Q
O
+ 12
million
;
where
Q
O
is the number of subscribers to Optuss NBN 50 plan. On the other hand, suppose NBNs
monthly total cost function is
TC
N
(
Q
N
) = 17
Q
N
+ 85
million
;
where
Q
N
=
Q
T
+
Q
O
is the total number of NBN 50 subscribers.
Let
P
T
denote Telstras monthly subscription fee and
P
O
Optuss monthly subscription fee. Within
a reasonable price range,
Q
T
and
Q
O
are determined by the following equations:
Q
T
(
P
T
;P
O
) = 4
million
4
million
25
P
T
+
3
million
25
P
O
Q
O
(
P
T
;P
O
) = 4
million
4
million
25
P
O
+
3
million
25
P
T
(a)
(2 marks)
Write down the prot functions for Telstra and Optus.
(b)
(4 marks)
Suppose NBN sets the access fee at
P
N
= $45
:
Assume that each telco only
considers setting the monthly subscription fee at one of the following three values: $60, $65,
and $70. Construct a 3
3
payo matrix for the pricing game between Telstra and Optus and
nd the Nash equilibrium of the game. Calculate each telcos prots, number of subscribers,
and the Herndahl Index (based on the number of subscribers) in equilibrium.
(c)
(4 marks)
Suppose NBN increases
P
N
from
$45
to
$55
:
Other things remain the same
:
Redo
(b).
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Climate Policy And Nonrenewable Resources The Green Paradox And Beyond
Authors: Karen Vollebergh, Rick Van Der Ploeg
1st Edition
0262319845, 9780262319843
