Me and you and everyone we know: an empirical analysis of local network effects in mobile communications

This paper aims at investigating the importance that consumers assign to local network effects (i.e. the extent to which they take into account their contacts' operators in determining their choices) and at identifying which individual characteristics affect consumers' preferences in relation to local network effects. Based on a sample of 193 Italian students, we find that consumers are highly heterogeneous with respect to the evaluation of the importance of their friend/family’s operator when choosing their own provider, and that such heterogeneity is associated to specific characteristics related to individual innovativeness and patterns of mobile phone usage. In particular, consumers who are more interested in local network effects are typically sophisticated users, who use intensively voice services and who are early adopters. Interestingly, consumers who pay attention to local network effects end up spending relatively little in proportion to their intensity of use.