Short-term Relationship between Mobile Phone Rates per Rounded Minute and per Second

We developed a model to analyze the short term relationship between mobile phone charges per rounded minute and per second, in a context where tariffs are freely determined. We assumed profit maximizing firms and an exponential distribution for mobile call duration. Among the results, we found that charges per second are significantly greater than charges per rounded minute, and lower average call duration is related to a greater difference between rates. The results of the model, calibrated with OECD estimates, are consistent with empirical evidence.