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Intra-household effects on demand for telephone service: Empirical evidence

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  • Ching-I Huang

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Abstract

Knowing the determinants of consumption decisions is important for targeted marketing. This paper proposes a method to study household adoption of network goods. I empirically investigate the factors which affect the interactions among household members in the choice of telephone service using a game-theoretical model. The proposed semiparametric maximum likelihood estimator accounts for potential multiple Nash equilibria. I apply the method to study the subscription decisions for cellular phone service in Taiwan. On average, a consumer’s probability of subscribing to cellular service rises 13 percentage points when the other household member chooses to subscribe, suggesting the existence of intra-household network effects. Moreover, the intra-household effect is heterogeneous among households. It increases in household income, but decreases in the number of children and the age difference within a household. Firms can substantially increase the effectiveness of a marketing strategy by targeting on the observed consumer characteristics. Copyright Springer Science+Business Media New York 2013

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Bibliographic Info

Article provided by Springer in its journal Quantitative Marketing and Economics.

Volume (Year): 11 (2013)
Issue (Month): 2 (June)
Pages: 231-261

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Handle: RePEc:kap:qmktec:v:11:y:2013:i:2:p:231-261

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Web page: http://www.springerlink.com/link.asp?id=111240

Related research

Keywords: Consumption externality; Multiple Nash equilibria; Demand estimation; Mobile phone service; Network effect; Targeted marketing; C31; D12; M31;

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Cited by:
  1. David Card & Laura Giuliano, 2011. "Peer Effects and Multiple Equilibria in the Risky Behavior of Friends," NBER Working Papers 17088, National Bureau of Economic Research, Inc.

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