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Demand price elasticity of mobile voice communication: A comparative firm level data analysis

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  • Sawadogo, Fayçal

Abstract

This study estimates the price elasticity of mobile voice communication in developed and developing countries using quarterly operator data from 2000 to 2017. Using a dynamic panel model through system-GMM, the study finds that the demand price elasticity is higher for operators in developed countries. Controlling for cross-price elasticity with internet data prices reveals that voice communication is a substitute for internet data usage in developed countries. Another important finding is that, for operators in developing countries, the price elasticity decreases with market development level, whereas it increases for those in developed countries. Demand for mobile voice communication is thus more sensitive to price changes in the less penetrated markets in developing countries and the mature markets in developed countries. Furthermore, over time, price elasticity has decreased across operators in developing countries, highlighting the need for updating regulatory frameworks for the telecommunications sector to reflect the sector's various developments. In addition, when formulating regulatory and tax policies, some important economic factors, such as income level and domestic market characteristics, should be considered to avoid losses in consumer welfare. The high estimated price elasticities suggest that operators do not have an obvious interest in engaging in collusive behavior that would hinder competition. Moreover, since there is no differential effect due to operators’ positions or market shares, asymmetric regulation of the dominant operators should be avoided.

Suggested Citation

  • Sawadogo, Fayçal, 2021. "Demand price elasticity of mobile voice communication: A comparative firm level data analysis," Information Economics and Policy, Elsevier, vol. 57(C).
  • Handle: RePEc:eee:iepoli:v:57:y:2021:i:c:s0167624521000275
    DOI: 10.1016/j.infoecopol.2021.100939
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    2. Martin Quinn & Miguel Godinho de Matos & Christian Peukert, 2022. "The Welfare Effects of Mobile Internet Access - Evidence from Roam-Like-at-Home," CESifo Working Paper Series 9612, CESifo.
    3. Aimene, Louise & Guiffard, Jean-Baptiste & Ivaldi, Marc & Liang, Julienne, 2023. "Welfare Cost of Mobile Spectrum (Mis)allocation," TSE Working Papers 23-1407, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    Econometric demand model; Dynamic panel analysis; Telecommunications services; Comparative analysis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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