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Identifying critical mass in the global cellular telephony market

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  • Grajek, Michał
  • Kretschmer, Tobias

Abstract

Technology diffusion processes are often said to have critical mass phenomena. We apply a model of demand with installed base effects to provide theoretically grounded empirical insights about critical mass. Our model allows us to rigorously identify and quantify critical mass as a function of installed base and price. Using data from the digital cellular telephony market, which is commonly assumed to have installed base effects, we apply our model and find that installed base effects were generally not strong enough to generate critical mass phenomena, except in the first cellular markets to introduce the technology.

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  • Grajek, Michał & Kretschmer, Tobias, 2012. "Identifying critical mass in the global cellular telephony market," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 496-507.
    • Handle: RePEc:eee:indorg:v:30:y:2012:i:6:p:496-507
    DOI: 10.1016/j.ijindorg.2012.06.003
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    Cited by:

    1. Grzybowski, Lukasz, 2015. "The role of network effects and consumer heterogeneity in the adoption of mobile phones: Evidence from South Africa," Telecommunications Policy, Elsevier, vol. 39(11), pages 933-943.
    2. Lechman, Ewa, 2014. "The ‘technological take-off’ and the 'critical mass'. A trial conceptualization," MPRA Paper 59506, University Library of Munich, Germany.
    3. de Bas, Patrick & Batura, Olga & Yagafarova, Anastasia & van Gorp, Nicolai & Kesler, Reinhold & Laitenberger, Ulrich & Bertschek, Irene & Pichler, Eva, 2017. "Business-to-Business relations in the online platform environment. FWC ENTR/300/PP/2013/FC-WIFO: Final report," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 170570.
    4. J. P. Eggers & Michał Grajek & Tobias Kretschmer, 2020. "Experience, Consumers, and Fit: Disentangling Performance Implications of Preentry Technological and Market Experience in 2G Mobile Telephony," Organization Science, INFORMS, vol. 31(2), pages 245-265, March.
    5. Shanjun Li & Yiyi Zhou, 2015. "Dynamics of Technology Adoption and Critical Mass: The Case of U.S. Electric Vehicle Market," Working Papers 15-10, NET Institute.
    6. Scaglione, Miriam & Giovannetti, Emanuele & Hamoudia, Mohsen, 2015. "The diffusion of mobile social networking: Exploring adoption externalities in four G7 countries," International Journal of Forecasting, Elsevier, vol. 31(4), pages 1159-1170.
    7. Raghu Garud & Arun Kumaraswamy & Anna Roberts & Le Xu, 2022. "Liminal movement by digital platform‐based sharing economy ventures: The case of Uber Technologies," Strategic Management Journal, Wiley Blackwell, vol. 43(3), pages 447-475, March.
    8. Leo Van Hove, 2016. "Measuring the value of mobile telecommunications networks," Netnomics, Springer, vol. 17(3), pages 191-222, November.
    9. Nina Czernich, 2011. "The emergence of broadband internet and consequences for economic and social development," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 37, May.
    10. Basaure, Arturo & Sridhar, Varadharajan, 2013. "Introduction of dynamic spectrum management technologies: The role of industry openness and spectrum policy," 24th European Regional ITS Conference, Florence 2013 88487, International Telecommunications Society (ITS).
    11. Arturo Basaure & Varadharajan Sridhar & Heikki Hämmäinen, 2016. "Adoption of dynamic spectrum access technologies: a system dynamics approach," Telecommunication Systems: Modelling, Analysis, Design and Management, Springer, vol. 63(2), pages 169-190, October.
    12. Zahra Navidi & Kai Nagel & Stephan Winter, 2020. "Toward identifying the critical mass in spatial two-sided markets," Environment and Planning B, , vol. 47(9), pages 1704-1724, November.
    13. Briglauer, Wolfgang & Cambini, Carlo & Gugler, Klaus & Stocker, Volker, 2021. "Net Neutrality and High Speed Broadband Networks: Evidence from OECD Countries," 23rd ITS Biennial Conference, Online Conference / Gothenburg 2021. Digital societies and industrial transformations: Policies, markets, and technologies in a post-Covid world 238012, International Telecommunications Society (ITS).
    14. Wolfgang Briglauer & Carlo Cambini & Klaus Gugler & Volker Stocker, 2023. "Net neutrality and high-speed broadband networks: evidence from OECD countries," European Journal of Law and Economics, Springer, vol. 55(3), pages 533-571, June.
    15. Weiss, Avi & Etziony, Amir, 2015. "The role of critical mass in establishing a successful network market: An experimental investigationAuthor-Name: Ruffle, Bradley J," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 101-110.
    16. Bradley J. Ruffle, Avi Weiss, Amir Etziony, 2015. "The Role of Critical Mass in Establishing a Successful Network Market: An Experimental Investigation," LCERPA Working Papers 0092, Laurier Centre for Economic Research and Policy Analysis, revised 12 May 2015.

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    More about this item

    Keywords

    Critical mass; Network effects; Technology diffusion; Cellular telephony;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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