Demand and innovation in services: The case of mobile communications
AbstractThis paper aims to analyse the pricing strategies of mobile communications operators and examine the role of demand characteristics in the development of new tariff plans. In so doing, we depart from a traditional industrial organization approach to price discrimination and interpret new tariff plans as innovations. In the spirit of Schumpeter, we look at competition in this sector as depending upon this form of innovation, and we argue that, given the specific features of the industry, the development of new tariff plans is strongly related to the users' characteristics and behaviour. Our main point is that in a context of uncertainty, demand affects firms' innovative strategies in two ways: first, by providing information on user behaviour and by increasing the capability of market segmentation; and second, by providing the incentives to innovate. This argument is supported by an empirical analysis carried out on the basis of an original dataset which includes all the tariff plans on offer in the history of the Italian market between 1992 and 2005. We find that both a firm's installed customer base and the level of market saturation play a role in shaping firms' innovative pricing strategies, in terms of the number and characteristics of the new tariff plans.
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Bibliographic InfoArticle provided by Elsevier in its journal Research Policy.
Volume (Year): 39 (2010)
Issue (Month): 7 (September)
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Tariff plans Demand characteristics Mobile communications sector;
Other versions of this item:
- Nicoletta Corrocher & Lorenzo Zirulia, 2007. "Demand and Innovation in Services: the Case of Mobile Communications," KITeS Working Papers 199, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Mar 2007.
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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