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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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    Cited by:

    1. Sobolewski, Maciej & Czajkowski, Mikołaj, 2018. "Receiver benefits and strategic use of call externalities in mobile telephony markets," Information Economics and Policy, Elsevier, vol. 44(C), pages 16-27.
    2. 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.
    3. Czajkowski, Mikołaj & Sobolewski, Maciej, 2016. "How much do switching costs and local network effects contribute to consumer lock-in in mobile telephony?," Telecommunications Policy, Elsevier, vol. 40(9), pages 855-869.
    4. Confraria, João & Ribeiro, Tiago & Vasconcelos, Helder, 2017. "Analysis of consumer preferences for mobile telecom plans using a discrete choice experiment," Telecommunications Policy, Elsevier, vol. 41(3), pages 157-169.

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    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.;
    All these keywords.

    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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