Estimating critical mass in the global cellular telephony market
AbstractCritical Mass is a common feature of technology diffusion processes. We develop a structural model of demand with network effects to provide a rigorous definition of critical mass as a function of installed base, price and network effects. Using data from the digital cellular telephony market, we identify critical mass phenomena and find that differences in the critical mass point in different countries rest mainly on different countries’ socioeconomic characteristics and the extent of competition in a country. This application illustrates that our demand model can be operationalized easily and can generate theoretically grounded empirical insights about critical mass phenomena.
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Bibliographic InfoPaper provided by ESMT European School of Management and Technology in its series ESMT Research Working Papers with number ESMT-08-004 (R1).
Length: 44 pages
Date of creation: 13 Jun 2008
Date of revision: 15 Apr 2010
Publication status: Published in International Journal of Industrial Organization 30(6): 496–507.
critical mass; network effects; technology diffusion; cellular telephony;
Find related papers by JEL classification:
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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