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Measuring network effects in mobile telecommunications markets with stated-preference valuation methods

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  • Miko?aj Czajkowski
  • Maciej Sobolewski

Abstract

This paper demonstrates how stated-preference methods can be applied for modelling consumers' preferences in mobile telecommunications, and for measuring network effects. This will be illustrated with a case study of mobile phone operators in Poland. A random parameters multinomial logit model will be constructed to analyse consumer preferences. This approach allows calculating welfare effects, as well as marginal rates of substitution of the attributes used to describe the choices, such as operator brand and distribution of family and friends among available mobile networks. The results confirm the existence of a strong network effect, which is related to the size of the social network a particular subscriber belongs to, rather than the absolute size of the mobile operator's customer base. In addition, brand perception and brand loyalty will be identified as important determinants of operator choice. Finally, through the application of a non-market valuation method, monetary values of the network effect and of brand loyalty, will be calculated.

Suggested Citation

  • Miko?aj Czajkowski & Maciej Sobolewski, 2011. "Measuring network effects in mobile telecommunications markets with stated-preference valuation methods," International Journal of Management and Network Economics, Inderscience Enterprises Ltd, vol. 2(2), pages 197-215.
  • Handle: RePEc:ids:ijmnec:v:2:y:2011:i:2:p:197-215
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    Citations

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    Cited by:

    1. Czajkowski, Mikołaj & Sobolewski, Maciej, 2016. "Estimating call externalities in mobile telephony," 27th European Regional ITS Conference, Cambridge (UK) 2016 148706, International Telecommunications Society (ITS).
    2. Mikołaj Czajkowski & Maciej Sobolewski, 2016. "Strategic use of external benefits for entry deterrence: the case of a mobile telephony market," Working Papers 2016-27, Faculty of Economic Sciences, University of Warsaw.
    3. Basaran, Alparslan A. & Cetinkaya, Murat & Bagdadioglu, Necmiddin, 2014. "Operator choice in the mobile telecommunications market: Evidence from Turkish urban population," Telecommunications Policy, Elsevier, vol. 38(1), pages 1-13.
    4. Mikołaj Czajkowski & Maciej Sobolewski, 2013. "Switching Costs and Network Effects – How Much Do they Really Matter in Mobile Telecommunications?," Working Papers 2013-29, Faculty of Economic Sciences, University of Warsaw.
    5. Czajkowski, Mikołaj & Sobolewski, Maciej, 2013. "Estimation of switching costs and network effects in mobile telecommunications in Poland," 24th European Regional ITS Conference, Florence 2013 88515, International Telecommunications Society (ITS).

    More about this item

    Keywords

    network effects; mobile telecommunications; brand valuation; stated preference methods; non-market valuation methods; choice experiment; multinomial conditional logit model; preference heterogeneity; random parameter models; Poland; mobile communications; consumer preferences.;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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