IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v36y2017i6p815-837.html
   My bibliography  Save this article

Mobile Money in Tanzania

Author

Listed:
  • Nicholas Economides

    (Stern School of Business, New York University, New York, New York 10012; Networks, Electronic Commerce and Telecommunications Institute, New York, New York 10012)

  • Przemyslaw Jeziorski

    (Haas School of Business, University of California, Berkeley, Berkeley, California 94720)

Abstract

In developing countries, mobile telecom networks have emerged as major providers of financial services, bypassing the sparse retail networks of traditional banks. We analyze a large individual-level data set of mobile money transactions in Tanzania to provide evidence of the impact of mobile money on alleviating financial exclusion in developing countries. We identify three types of transactions: (i) money transfers to others, (ii) short-distance money self-transportation, and (iii) money storage for short to medium periods of time. We utilize a natural experiment of an unanticipated increase in transaction fees to identify the demand for these transactions. Using the demand estimates, we find that the willingness to pay to avoid walking with cash an extra kilometer (short-distance self-transportation) and to avoid storing money at home (money storage) for an extra day are 1.25% and 0.8% of an average transaction, respectively, which demonstrates that mobile money ameliorates significant amounts of crime-related risk. We explore the implications of these estimates for pricing and demonstrate the profitability of incentive-compatible price discrimination based on type of service, consumer location, and distance between transaction origin and destination. We show that differential pricing based on the features of a transaction delivers a Pareto improvement.

Suggested Citation

  • Nicholas Economides & Przemyslaw Jeziorski, 2017. "Mobile Money in Tanzania," Marketing Science, INFORMS, vol. 36(6), pages 815-837, November.
  • Handle: RePEc:inm:ormksc:v:36:y:2017:i:6:p:815-837
    DOI: 10.1287/mksc.2017.1027
    as

    Download full text from publisher

    File URL: https://doi.org/10.1287/mksc.2017.1027
    Download Restriction: no

    File URL: https://libkey.io/10.1287/mksc.2017.1027?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
    2. Bart J. Bronnenberg & Vijay Mahajan, 2001. "Unobserved Retailer Behavior in Multimarket Data: Joint Spatial Dependence in Market Shares and Promotion Variables," Marketing Science, INFORMS, vol. 20(3), pages 284-299, October.
    3. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-244, April.
    4. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    5. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    6. K. Sudhir & Debabrata Talukdar, 2015. "The “Peter Pan Syndrome” in Emerging Markets: The Productivity-Transparency Trade-off in IT Adoption," Marketing Science, INFORMS, vol. 34(4), pages 500-521, July.
    7. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    8. Alan Sule & Honoré Bo E. & Hu Luojia & Leth-Petersen Søren, 2014. "Estimation of Panel Data Regression Models with Two-Sided Censoring or Truncation," Journal of Econometric Methods, De Gruyter, vol. 3(1), pages 1-20, January.
    9. Froeb, Luke & Tschantz, Steven & Werden, Gregory J., 2005. "Pass-through rates and the price effects of mergers," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 703-715, December.
    10. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-1057, September.
    11. Grant Miller & A. Mushfiq Mobarak, 2015. "Learning About New Technologies Through Social Networks: Experimental Evidence on Nontraditional Stoves in Bangladesh," Marketing Science, INFORMS, vol. 34(4), pages 480-499, July.
    12. Wolfgang Jank & P. K. Kannan, 2005. "Understanding Geographical Markets of Online Firms Using Spatial Models of Customer Choice," Marketing Science, INFORMS, vol. 24(4), pages 623-634, December.
    13. Farrell, Joseph & Saloner, Garth, 1992. "Converters, Compatibility, and the Control of Interfaces," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 9-35, March.
    14. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-41, March.
    15. William Jack & Tavneet Suri, 2014. "Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution," American Economic Review, American Economic Association, vol. 104(1), pages 183-223, January.
    16. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
    17. Shawn Cole & Thomas Sampson & Bilal Zia, 2011. "Prices or Knowledge? What Drives Demand for Financial Services in Emerging Markets?," Journal of Finance, American Finance Association, vol. 66(6), pages 1933-1967, December.
    18. Brian McManus, 2007. "Nonlinear pricing in an oligopoly market: the case of specialty coffee," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 512-532, June.
    19. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    20. repec:rje:randje:v:37:y:2006:i:4:p:964-982 is not listed on IDEAS
    21. Nathan H. Miller & Matthew Osborne, 2014. "Spatial differentiation and price discrimination in the cement industry: evidence from a structural model," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 221-247, June.
    22. Laxman Narasimhan & Kannan Srinivasan & K. Sudhir, 2015. "Editorial —Marketing Science in Emerging Markets," Marketing Science, INFORMS, vol. 34(4), pages 473-479, July.
    23. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    24. Raphael Thomadsen, 2005. "The Effect of Ownership Structure on Prices in Geographically Differentiated Industries," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 908-929, Winter.
    25. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 31, pages 1967-2072, Elsevier.
    26. Jean-Francois Houde, 2012. "Spatial Differentiation and Vertical Mergers in Retail Markets for Gasoline," American Economic Review, American Economic Association, vol. 102(5), pages 2147-2182, August.
    27. 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.
    28. E. Weyl & Michal Fabinger, 2015. "A Tractable Approach to Pass-Through Patterns," 2015 Meeting Papers 747, Society for Economic Dynamics.
    29. Jenny C. Aker, 2010. "Information from Markets Near and Far: Mobile Phones and Agricultural Markets in Niger," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 46-59, July.
    30. Kaifu Zhang, 2015. "Breaking Free of a Stereotype: Should a Domestic Brand Pretend to Be a Foreign One?," Marketing Science, INFORMS, vol. 34(4), pages 539-554, July.
    31. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    32. Demirguc-Kunt, Asli & Klapper, Leora, 2012. "Financial inclusion in Africa : an overview," Policy Research Working Paper Series 6088, The World Bank.
    33. K. Sudhir & Joe Priester & Matt Shum & David Atkin & Andrew Foster & Ganesh Iyer & Ginger Jin & Daniel Keniston & Shinobu Kitayama & Mushfiq Mobarak & Yi Qian & Ishani Tewari & Wendy Wood, 2015. "Research Opportunities in Emerging Markets: an Inter-disciplinary Perspective from Marketing, Economics, and Psychology," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 2(4), pages 264-276, December.
    34. Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
    35. Allenby, Greg M. & Rossi, Peter E., 1998. "Marketing models of consumer heterogeneity," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 57-78, November.
    36. Yi Qian & Qiang Gong & Yuxin Chen, 2013. "Untangling Searchable and Experiential Quality Responses to Counterfeits," NBER Working Papers 18784, National Bureau of Economic Research, Inc.
    37. J. Miguel Villas-Boas & Russell S. Winer, 1999. "Endogeneity in Brand Choice Models," Management Science, INFORMS, vol. 45(10), pages 1324-1338, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sunday C. Eze & Vera C. A. Chinedu-Eze & Hart O. Awa, 2021. "Key Success Factors (KSFs) Underlying the Adoption of Social Media Marketing Technology," SAGE Open, , vol. 11(2), pages 21582440211, April.
    2. Dalton, Patricio & Pamuk, H. & Ramrattan, R. & van Soest, Daan & Uras, Burak, 2019. "Transparency and Financial Inclusion : Experimental Evidence from Mobile Money (revision of CentER DP 2018-042)," Discussion Paper 2019-032, Tilburg University, Center for Economic Research.
    3. Yanwen Wang & Chunhua Wu & Ting Zhu, 2019. "Mobile Hailing Technology and Taxi Driving Behaviors," Marketing Science, INFORMS, vol. 38(5), pages 734-755, September.
    4. Carolina Mattsson, 2019. "Networks of monetary flow at native resolution," Papers 1910.05596, arXiv.org.
    5. Beck, Thorsten & Pamuk, Haki & Ramrattan, Ravindra & Uras, Burak R., 2018. "Payment instruments, finance and development," Journal of Development Economics, Elsevier, vol. 133(C), pages 162-186.
    6. Ky, Serge Stéphane & Rugemintwari, Clovis & Sauviat, Alain, 2021. "Friends or Foes? Mobile money interaction with formal and informal finance," Telecommunications Policy, Elsevier, vol. 45(1).
    7. Kabengele, Christian & Hahn, Rüdiger, 2021. "Institutional and firm-level factors for mobile money adoption in emerging markets–A configurational analysis," Technological Forecasting and Social Change, Elsevier, vol. 171(C).
    8. Malm, Meagan K. & Toyama, Kentaro, 2021. "The burdens and the benefits: Socio-economic impacts of mobile phone ownership in Tanzania," World Development Perspectives, Elsevier, vol. 21(C).
    9. Dalton, Patricio & Pamuk, Haki & Ramrattan, R. & van Soest, Daan & Uras, Burak, 2018. "Payment Technology Adoption and Finance : A Randomized-Controlled-Trial with SMEs," Other publications TiSEM 82d89846-b515-41c7-b431-5, Tilburg University, School of Economics and Management.
    10. Mothobi, Onkokame & Grzybowski, Lukasz, 2017. "Infrastructure deficiencies and adoption of mobile money in Sub-Saharan Africa," Information Economics and Policy, Elsevier, vol. 40(C), pages 71-79.
    11. Melia, Elvis, 2019. "The impact of information and communication technologies on jobs in Africa: a literature review," Discussion Papers 3/2019, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE).
    12. Sunday C. Eze & Vera C. A. Chinedu-Eze & Clinton K. Okike & Adenike O. Bello, 2020. "Critical factors influencing the adoption of digital marketing devices by service-oriented micro-businesses in Nigeria: A thematic analysis approach," Palgrave Communications, Palgrave Macmillan, vol. 7(1), pages 1-14, December.
    13. Sunday C. Eze & Hart O. Awa & Vera C. A. Chinedu-Eze & Adenike O. Bello, 2021. "Demographic determinants of mobile marketing technology adoption by small and medium enterprises (SMEs) in Ekiti State, Nigeria," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-11, December.
    14. Sunday C. Eze & Vera C. A. Chinedu-Eze & Clinton K. Okike & Adenike O. Bello, 2020. "Factors influencing the use of e-learning facilities by students in a private Higher Education Institution (HEI) in a developing economy," Palgrave Communications, Palgrave Macmillan, vol. 7(1), pages 1-15, December.
    15. Ahmad Hassan Ahmad & Christopher Green & Fei Jiang, 2020. "Mobile Money, Financial Inclusion And Development: A Review With Reference To African Experience," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 753-792, September.
    16. Dube, Thulani & Chummun, Bibi Zaheenah, 2019. "Mobile Money access and usage among the rural communities in Zimbabwe," MPRA Paper 97578, University Library of Munich, Germany, revised 05 Dec 2019.
    17. Siliang Tong & Xueming Luo & Bo Xu, 2020. "Personalized mobile marketing strategies," Journal of the Academy of Marketing Science, Springer, vol. 48(1), pages 64-78, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nathan H. Miller & Matthew Osborne, 2014. "Spatial differentiation and price discrimination in the cement industry: evidence from a structural model," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 221-247, June.
    2. Laxman Narasimhan & Kannan Srinivasan & K. Sudhir, 2015. "Editorial —Marketing Science in Emerging Markets," Marketing Science, INFORMS, vol. 34(4), pages 473-479, July.
    3. Alon Eizenberg & Saul Lach & Merav Oren-Yiftach, 2021. "Retail Prices in a City," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 175-206, May.
    4. Jinho Jung & Juan Sesmero & Ralph Siebert, 2020. "Spatial Differentiation and Market Power in Input Procurement: Evidence from a Structural Model of the Corn Market," CESifo Working Paper Series 8088, CESifo.
    5. Weining Bao & Jian Ni & Shubhranshu Singh, 2018. "Informal Lending in Emerging Markets," Marketing Science, INFORMS, vol. 37(1), pages 123-137, January.
    6. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    7. Mitsukuni Nishida, 2015. "Estimating a Model of Strategic Network Choice: The Convenience-Store Industry in Okinawa," Marketing Science, INFORMS, vol. 34(1), pages 20-38, January.
    8. Alexei Alexandrov, 2015. "Anti-Competitive Interconnection: the effects of the elasticity of consumers' expectations and the shape of the network effects function," Journal of Industrial Economics, Wiley Blackwell, vol. 63(1), pages 74-99, March.
    9. Nathan H. Miller & Gloria Sheu, 2021. "Quantitative Methods for Evaluating the Unilateral Effects of Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 143-177, February.
    10. Jung, Jinho & Sesmero, Juan Pablo & Balagtas, Joseph V., 2017. "Market Power in Feedstock Procurement and Economic Effects of Corn Ethanol," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258544, Agricultural and Applied Economics Association.
    11. Garcia-Swartz, Daniel D. & Garcia-Vicente, Florencia, 2015. "Network effects on the iPhone platform: An empirical examination," Telecommunications Policy, Elsevier, vol. 39(10), pages 877-895.
    12. Deishin Lee & Haim Mendelson, 2007. "Adoption of Information Technology Under Network Effects," Information Systems Research, INFORMS, vol. 18(4), pages 395-413, December.
    13. Stéphane Turolla, 2016. "Spatial Competition in the French Supermarket Industry," Annals of Economics and Statistics, GENES, issue 121-122, pages 213-259.
    14. Kim, Hyunchul & Kim, Kyoo il, 2017. "Estimating store choices with endogenous shopping bundles and price uncertainty," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 1-36.
    15. Marano, Angelo, 2000. "Beyond The London-Frankfurt Dichothomy. What Space For The Other European Financial Centers?," ERSA conference papers ersa00p407, European Regional Science Association.
    16. Aguirregabiria, Victor & Suzuki, Junichi, 2015. "Empirical Games of Market Entry and Spatial Competition in Retail Industries," CEPR Discussion Papers 10410, C.E.P.R. Discussion Papers.
    17. Ho, Chun-Yu, 2012. "Market structure, welfare, and banking reform in China," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 291-313.
    18. Kevin J. Boudreau & Andrei Hagiu, 2009. "Platform Rules: Multi-Sided Platforms as Regulators," Chapters, in: Annabelle Gawer (ed.), Platforms, Markets and Innovation, chapter 7, Edward Elgar Publishing.
    19. Pradeep Chintagunta & Jean-Pierre Dubé & Vishal Singh, 2003. "Balancing Profitability and Customer Welfare in a Supermarket Chain," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 111-147, March.
    20. Diether W. Beuermann & Inder J. Ruprah & Ricardo E. Sierra, 2016. "Do remittances help smooth consumption during health shocks?: Evidence from Jamaica," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(3), pages 1-19.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:36:y:2017:i:6:p:815-837. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/inforea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Matthew Walls (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.