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Estimating network effects and compatibility: Evidence from the Polish mobile market

  • Grajek, Michal

I develop a structural demand model for mobile telephony that facilitates the identification of network effects and inter-network compatibility. Network effects are measured as the dependence of consumer willingness to pay on the installed base of subscribers, compatibility as the relative extent of cross- and own-network effects. Estimating the model using quarterly panel data from the Polish mobile telephone market for the period 1996-2001, I find strong network effects and, despite full interconnection of the mobile telephone networks, low compatibility. I also show that ignoring network effects leads to overestimation of demand elasticity.

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Article provided by Elsevier in its journal Information Economics and Policy.

Volume (Year): 22 (2010)
Issue (Month): 2 (May)
Pages: 130-143

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Handle: RePEc:eee:iepoli:v:22:y:2010:i:2:p:130-143
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