Abstract
This paper conducts a theory based empirical analysis of the determinants of international telephone traffic imbalances. Under the current accounting rate system and a Bertrand–Nash model with capacity constraint, it is shown that the traffic imbalances are determined by asymmetries in country specific cost structure, network capacity, market concentration, and income levels. Using the data for international calls between the United States and 148 foreign destinations, the study found that the increasing imbalances in telephone traffic for the United States are well explained by the variables suggested by the theory.
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