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The effect of switching costs on prices: an application to the Peruvian mobile phone market

Author

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  • Tilsa Ore Monago

    (Stony Brook University, Department of Economics, 100 Nicolls Road, Stony Brook, NY 11794-4384)

Abstract

Based on a game theoretical model I previously developed, I present some evidence of the effect of the unlocked-handset policy recently implemented in Peru based on market analysis and reduced form empirical methods using consumer panel data. From the market analysis, declining prices are observed with the implementation of the policy in January 2015, also the switching rate rocketed since then. To retain consumers and attract rival's consumers, companies responded also with very low on-net prices through their "private network" with unlimited minutes, which may have increased the network effects in the market. From my estimation, I found a significant negative effect of switching costs on demand for voice traffic (which suggest a positive effect of the unlocked-handset policy on demand) and positive network effects on the demand.

Suggested Citation

  • Tilsa Ore Monago, 2017. "The effect of switching costs on prices: an application to the Peruvian mobile phone market," Working Papers 17-12, NET Institute.
    • Handle: RePEc:net:wpaper:1712
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    More about this item

    Keywords

    switching costs; mobile telecommunications; unlocked-handsets policy;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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