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Estimating Consumer Inertia in Repeated Choices of Smartphones

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  • Lukasz Grzybowski
  • Ambre Nicolle

Abstract

In this paper, we use a unique dataset on switching between mobile handsets in a sample of about 8,623 subscribers using tariffs without handset subsidies from a single mobile operator on a monthly basis between July 2011 and December 2014. We estimate a discrete choice model in which we account for disutility from switching to different operating systems and handset brands and for unobserved time-persistent preferences for operating systems and brands. Our estimation results indicate the presence of significant inertia in the choices of operating systems and brands. We find that it is harder for consumers to switch from iOS to Android and other operating systems than from Android and other operating systems to iOS. Moreover, we find that there is significant time-persistent heterogeneity in preferences for different operating systems and brands, which also leads to state-dependent choices. We use our model to simulate market shares in the absence of switching costs and conclude that the market shares of Android and smaller operating systems would increase at the expense of the market share of iOS.

Suggested Citation

  • Lukasz Grzybowski & Ambre Nicolle, 2018. "Estimating Consumer Inertia in Repeated Choices of Smartphones," CESifo Working Paper Series 7434, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_7434
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    File URL: https://www.cesifo-group.de/DocDL/cesifo1_wp7434.pdf
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    References listed on IDEAS

    as
    1. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
    2. repec:ags:stataj:119283 is not listed on IDEAS
    3. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    4. Hole, Arne Risa, 2007. "Fitting mixed logit models by using maximum simulated likelihood," Stata Journal, StataCorp LP, vol. 7(3), pages 1-14.
    5. Grzybowski, Lukasz & Liang, Julienne, 2015. "Estimating demand for fixed-mobile bundles and switching costs between tariffs," Information Economics and Policy, Elsevier, vol. 33(C), pages 1-10.
    6. Jean-Pierre Dubé & Günter J. Hitsch & Peter E. Rossi, 2010. "State dependence and alternative explanations for consumer inertia," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 417-445.
    7. repec:eee:indorg:v:60:y:2018:i:c:p:1-31 is not listed on IDEAS
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    More about this item

    Keywords

    smartphones; consumer inertia; switching costs; mixed logit; iOS; Android;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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