An Analysis of Profit and Consumer Surplus Implications of Resale

Abstract When a monopoly carrier provides multiple services(voice, data, video) through a single network, its’ profit-maximizing pricing policy usually induces resale. In many cases, resale can benefit consumers by providing them with a cheaper alternatives to a highpriced service. Nevertheless, in this paper, we demonstrate that there are situations in which the carrier can use resale to improve its profits at consumers’ expense. We also find that even in cases where resale costs the carrier profit, total consumer surplus does not necessarily always increase. In fact, resale always results in higher consumer surplus in for some users and lower consumer surplus for others. Those findings suggest a regulator should exercise caution in defining the policy for resale.