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Me and you and everyone we know: An empirical analysis of local network effects in mobile communications

  • Corrocher, Nicoletta
  • Zirulia, Lorenzo

This paper investigates the importance that consumers assign to local network effects, i.e. the extent to which they take account of their contacts' mobile operators when choosing a provider for themselves. The authors identify individual characteristics that affect the importance consumers attach to local network effects. The study relies on a survey of 193 Italian students. The results show that consumers are highly heterogeneous with respect to the importance they give to the operators chosen by their friends/family members in choosing which provider to use. This heterogeneity is associated with individual innovativeness and patterns of mobile phone usage. For instance, consumers who are more interested in local network effects are typically more-aware users, who use voice services quite intensively. These consumers, who pay attention to local network effects, spend comparatively little proportional to the intensity of their mobile usage.

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Article provided by Elsevier in its journal Telecommunications Policy.

Volume (Year): 33 ()
Issue (Month): 1-2 (February)
Pages: 68-79

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Handle: RePEc:eee:telpol:v:33:y::i:1-2:p:68-79
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  1. Valletti, Tommaso M., 1999. "A model of competition in mobile communications," Information Economics and Policy, Elsevier, vol. 11(1), pages 61-72, March.
  2. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
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  5. Daniel Birke & G. M. Peter Swann, 2005. "Social networks and choice of mobile phone operator," Occasional Papers 14, Industrial Economics Division.
  6. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March.
  7. Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
  8. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
  9. Valletti, Tommaso M & Cave, Martin, 1998. "Competition in UK mobile communications," Telecommunications Policy, Elsevier, vol. 22(2), pages 109-131, March.
  10. Lukasz Grzybowski, 2008. "Estimating Switching Costs in Mobile Telephony in the UK," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 113-132, June.
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  12. Church, Jeffrey & Gandal, Neil, 2004. "Platform Competition in Telecommunications," CEPR Discussion Papers 4659, C.E.P.R. Discussion Papers.
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