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Text and voice: complements, substitutes or both?

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  • K. Andersson
  • Ø 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.

Suggested Citation

  • K. Andersson & Ø Foros & F. Steen, 2009. "Text and voice: complements, substitutes or both?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 18(6), pages 1231-1247, December.
    • Handle: RePEc:oup:indcch:v:18:y:2009:i:6:p:1231-1247
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    Cited by:

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    2. Genakos, Christos & Valletti, Tommaso, 2011. "Seesaw in the air: Interconnection regulation and the structure of mobile tariffs," Information Economics and Policy, Elsevier, vol. 23(2), pages 159-170, June.
    3. 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.
    4. Wellmann, Nicolas, 2017. "OTT-messaging and mobile telecommunication: A joint market? - An empirical approach," DICE Discussion Papers 256, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. 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.
    6. 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.
    7. Gerpott, Torsten J. & Meinert, Phil, 2016. "The impact of mobile Internet usage on mobile voice calling behavior: A two-level analysis of residential mobile communications customers in Germany," Telecommunications Policy, Elsevier, vol. 40(1), pages 62-76.
    8. Youngsoo Kim & Rahul Telang & William B. Vogt & Ramayya Krishnan, 2010. "An Empirical Analysis of Mobile Voice Service and SMS: A Structural Model," Management Science, INFORMS, vol. 56(2), pages 234-252, February.
    9. Wellmann, Nicolas, 2017. "OTT-Messaging and Mobile Telecommunication: A Joint Market? An Empirical Approach," 28th European Regional ITS Conference, Passau 2017 169503, International Telecommunications Society (ITS).
    10. L. Wei & J. Xiao, 2012. "Factors affecting the take-off of innovative technologies: evidence from digital cameras," Applied Economics, Taylor & Francis Journals, vol. 44(32), pages 4143-4152, November.
    11. Wellmann, Nicolas, 2019. "Are OTT messaging and mobile telecommunication an interrelated market? An empirical analysis," Telecommunications Policy, Elsevier, vol. 43(9).
    12. Marius F. Niculescu & Seungjin Whang, 2012. "Research Note ---Codiffusion of Wireless Voice and Data Services: An Empirical Analysis of the Japanese Mobile Telecommunications Market," Information Systems Research, INFORMS, vol. 23(1), pages 260-279, March.
    13. Torsten J. Gerpott & Sandra Thomas & Michael Weichert, 2014. "Usage of established and novel mobile communication services: Substitutional, independent or complementary?," Information Systems Frontiers, Springer, vol. 16(3), pages 491-507, July.
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    15. Shastitko, Andrey Ye. (Шаститко, Андрей) & Pavlova, Natalia S. (Павлова, Наталья), 2019. "Complex Services: Product Market Definition in Mobile Communications [Услуги В Комплексе: Определение Продуктовых Границ Рынка В Мобильной Связи]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 120-141, August.

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    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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