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Text and voice: complements, substitutes or both?

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  • K. Andersson
  • � Foros
  • F. Steen

Abstract

Text messaging has become an important revenue component for most mobile operators. We develop a simple model of demand for mobile services incorporating dynamics of information exchange. We show that when incoming communication stimulate outgoing communication, services that initially may be perceived as substitutes, such as mobile text and voice, may evolve into complements in terms of the price effect when the network size becomes large. We estimate the demand for text messaging in the Norwegian market and find that the cross-price effect of voice depends on the network size. Voice is a substitute for text messages for small network sizes, and a complement for large network sizes. Copyright 2009 The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Industrial and Corporate Change.

Volume (Year): 18 (2009)
Issue (Month): 6 (December)
Pages: 1231-1247

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Handle: RePEc:oup:indcch:v:18:y:2009:i:6:p:1231-1247

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  1. Ernst R. Berndt & Robert S. Pindyck & Pierre Azoulay, 1999. "Network Effects and Diffusion in Pharmaceutical Markets: Antiulcer Drugs," NBER Working Papers 7024, National Bureau of Economic Research, Inc.
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  8. Heli Koski & Tobias Kretschmer, 2005. "Entry, standards and competition : firm strategies and the diffusion of mobile telephony," LSE Research Online Documents on Economics 801, London School of Economics and Political Science, LSE Library.
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  14. Liikanen, Jukka & Stoneman, Paul & Toivanen, Otto, 2004. "Intergenerational effects in the diffusion of new technology: the case of mobile phones," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1137-1154, November.
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Cited by:
  1. Harbord, David & Pagnozzi, Marco, 2008. "On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates," MPRA Paper 14540, University Library of Munich, Germany.
  2. Christos Genakos & Tommaso Valletti, 2011. "Seesaw in the Air: Interconnection Regulation and the Structure of Mobile Tariffs," CEP Discussion Papers dp1045, Centre for Economic Performance, LSE.
  3. Grzybowski, Lukasz & Pereira, Pedro, 2008. "The complementarity between calls and messages in mobile telephony," Information Economics and Policy, Elsevier, vol. 20(3), pages 279-287, September.
  4. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
  5. Basalisco, Bruno, 2012. "The effect of user interaction on the demand for mobile text messages: Evidence from cross-country data," Information Economics and Policy, Elsevier, vol. 24(2), pages 132-144.

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