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Estimating consumer surplus in the mobile telecommunications market: The case of Korea

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  • Hee Lee, Duk
  • Hee Lee, Dong

Abstract

This paper estimates consumer surplus in the Korean mobile telephone services (MTS) market. The Korean mobile telecommunications market has grown rapidly since 1997 when competition was introduced and Code Division Multiple Access (CDMA) technology was commercialized. Because consumer surplus is relevant to the controversy over establishing an appropriate price level between consumers and service providers, the need for a robust measurement of benefit from MTS is increasing. The measured net consumer surplus estimated by means of elasticities of demand reached about US$48.8 billion in the period 1996-2004 and the changes amounted to about US$8.8 billion during the same period. In particular, after competition was introduced into the market with an accompanying price decrease and increase in the number of subscribers, consumers have benefited greatly. Therefore, it can be inferred that a facility-based competition policy and the reduction in price of access such as handset subsidies all played a positive role in the early diffusion of MTS in Korea. The estimated consumer surplus in this paper does not include network externality (option externality); if this were considered, the total social welfare of the consumer would be larger.

Suggested Citation

  • Hee Lee, Duk & Hee Lee, Dong, 0. "Estimating consumer surplus in the mobile telecommunications market: The case of Korea," Telecommunications Policy, Elsevier, vol. 30(10-11), pages 605-621, November.
    • Handle: RePEc:eee:telpol:v:30:y::i:10-11:p:605-621
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    Citations

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    Cited by:

    1. Daniel Sperber & Alan Shiell & Ken Fyie, 2010. "The cost‐effectiveness of a law banning the use of cellular phones by drivers," Health Economics, John Wiley & Sons, Ltd., vol. 19(10), pages 1212-1225, October.
    2. Sawadogo, Fayçal, 2021. "Demand price elasticity of mobile voice communication: A comparative firm level data analysis," Information Economics and Policy, Elsevier, vol. 57(C).
    3. Jerry Hausman & Agustin Ros, 2013. "An econometric assessment of telecommunications prices and consumer surplus in Mexico using panel data," Journal of Regulatory Economics, Springer, vol. 43(3), pages 284-304, June.
    4. Abhay Gupta, 2013. "Estimating Direct Gains in Consumer Welfare in Telecommunications Sector," Journal of Consumer Policy, Springer, vol. 36(2), pages 119-138, June.
    5. Ayala, Edgardo & Chapa, Joana & García, Lester & Hibert, Abel, 2018. "Welfare effects of the Telecommunication Reform in Mexico," Telecommunications Policy, Elsevier, vol. 42(1), pages 24-36.
    6. Baigorri, Carlos M. & Maldonado, Wilfredo F.L., 2014. "Optimal mobile termination rate: The Brazilian mobile market case," Telecommunications Policy, Elsevier, vol. 38(1), pages 86-95.

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