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Intra-household effects on demand for telephone service: Empirical evidence

  • Ching-I Huang

    ()

Knowing the determinants of consumption decisions is important for targeted marketing. This paper proposes a method to study household adoption of network goods. I empirically investigate the factors which affect the interactions among household members in the choice of telephone service using a game-theoretical model. The proposed semiparametric maximum likelihood estimator accounts for potential multiple Nash equilibria. I apply the method to study the subscription decisions for cellular phone service in Taiwan. On average, a consumer’s probability of subscribing to cellular service rises 13 percentage points when the other household member chooses to subscribe, suggesting the existence of intra-household network effects. Moreover, the intra-household effect is heterogeneous among households. It increases in household income, but decreases in the number of children and the age difference within a household. Firms can substantially increase the effectiveness of a marketing strategy by targeting on the observed consumer characteristics. Copyright Springer Science+Business Media New York 2013

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File URL: http://hdl.handle.net/10.1007/s11129-012-9130-y
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Article provided by Springer in its journal Quantitative Marketing and Economics.

Volume (Year): 11 (2013)
Issue (Month): 2 (June)
Pages: 231-261

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Handle: RePEc:kap:qmktec:v:11:y:2013:i:2:p:231-261
DOI: 10.1007/s11129-012-9130-y
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