An empirical analysis of cellular demand in South Africa
AbstractWe analyze demand for prepaid cellular voice and short message service (SMS) in South Africa by means of a demand-and-supply structural model based on a multinomial specification fitted to a cross-sectional data set on Vodacom customers collected in 2005. We find that consumers are very sensitive to changes in prices, with higher price elasticities than those typically found in developed countries. Consumers attach a higher value to communications during peak hours but since these are priced highly, they are as much as twice more elastic than off-peak communications. In relative terms, demand for communications during peak hours is more elastic for urban than for rural consumers, while the reverse can be said about demand for off-peak hours. The highest valuations are those placed by rural consumers on working hour communications. A policy implication of our analysis is that while in terms of access cellular deployment in South Africa has gone a long way into bridging the gap between the ``first'' and ``second'' economies, in terms of usage if market organizations or regulatory institutions were to encourage further investment in network availability in rural areas this could be rewarding both for the firm and its rural customers.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7153.
Date of creation: Feb 2009
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Other versions of this item:
- Gasmi, Farid & Ivaldi, Marc & Recuero Virto, Laura, 2009. "An Empirical Analysis of Cellular Demand in South Africa," TSE Working Papers 09-091, Toulouse School of Economics (TSE).
- Gasmi, Farid & Ivaldi, Marc & Recuero Virto, Laura, 2008. "An Empirical Analysis of Cellular Demand in South Africa," IDEI Working Papers 531, Institut d'Économie Industrielle (IDEI), Toulouse.
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
- R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
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