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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.

Suggested Citation

  • 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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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lechman, Ewa, 2014. "The ‘technological take-off’ and the 'critical mass'. A trial conceptualization," MPRA Paper 59506, University Library of Munich, Germany.
    2. 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.
    3. Leo Van Hove, 2016. "Measuring the value of mobile telecommunications networks," Netnomics, Springer, vol. 17(3), pages 191-222, November.
    4. 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.
    5. 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.
    6. repec:zbw:zewexp:170570 is not listed on IDEAS
    7. 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.
    8. 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.
    9. 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.

    More about this item

    Keywords

    Critical mass; Network effects; Technology diffusion; Cellular telephony;

    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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