Switching Costs and Network Effects – How Much Do they Really Matter in Mobile Telecommunications?
AbstractOur study focuses on the identification and the measurement of switching costs and network effects in mobile telecommunications. Although these two phenomena create similar consumer lock-in mechanisms, there are no empirical studies that integrate them into one model of subscriber’s behavior. Our study fills this gap by applying stated preference valuation methods to a representative sample of individual mobile phone users in Poland. We find that number portability can be attributed to only approximately 50% of the total switching costs associated with changing either the provider or the service and the remaining part is associated with status quo inertia. Additionally, we show that because network effects play an important role in service valuation, they lead to strengthening the lock-in mechanisms even further. Our study provides the first empirical measurements of the relative importance of these simultaneous effects and provides the estimates of their monetary value.
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Bibliographic InfoPaper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2013-29.
Length: 25 pages
Date of creation: 2013
Date of revision:
Switching costs; network effects; mobile telecommunications; mobile number portability; brand valuation; stated preference; non-market valuation; discrete choice experiment; random parameters multinomial logit model;
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-29 (All new papers)
- NEP-COM-2013-11-29 (Industrial Competition)
- NEP-DCM-2013-11-29 (Discrete Choice Models)
- NEP-NET-2013-11-29 (Network Economics)
- NEP-REG-2013-11-29 (Regulation)
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