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Text and Voice: Complements, Substitutes or Both?


  • Andersson, Kjetil
  • Foros, Øystein
  • Steen, Frode


Text messaging has become an important revenue component for European and Asian mobile operators. We develop a simple model of demand for mobile services incorporating the existence of call externalities and network effects. We show that when incoming messages and calls stimulate outgoing communications, services that are perceived as substitutes, such as mobile text and voice, may evolve into complements in terms of the price effect when the network size becomes large. We estimate the demand for text messaging in the Norwegian market and find that the cross-price effect of voice depends on the network size. Voice is a substitute for text messages for small network sizes, and a complement for large network sizes.

Suggested Citation

  • Andersson, Kjetil & Foros, Øystein & Steen, Frode, 2006. "Text and Voice: Complements, Substitutes or Both?," CEPR Discussion Papers 5780, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5780

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    References listed on IDEAS

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    Cited by:

    1. Wellmann, Nicolas, 2017. "OTT-Messaging and Mobile Telecommunication: A Joint Market? An Empirical Approach," 28th European Regional ITS Conference, Passau 2017 169503, International Telecommunications Society (ITS).
    2. Basalisco, Bruno, 2012. "The effect of user interaction on the demand for mobile text messages: Evidence from cross-country data," Information Economics and Policy, Elsevier, vol. 24(2), pages 132-144.
    3. Genakos, Christos & Valletti, Tommaso, 2011. "Seesaw in the air: Interconnection regulation and the structure of mobile tariffs," Information Economics and Policy, Elsevier, vol. 23(2), pages 159-170, June.
    4. Harbord, David & Pagnozzi, Marco, 2008. "On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates," MPRA Paper 14540, University Library of Munich, Germany.
    5. Grzybowski, Lukasz & Pereira, Pedro, 2008. "The complementarity between calls and messages in mobile telephony," Information Economics and Policy, Elsevier, vol. 20(3), pages 279-287, September.
    6. repec:spr:infosf:v:16:y:2014:i:3:d:10.1007_s10796-012-9356-y is not listed on IDEAS
    7. Wellmann, Nicolas, 2017. "OTT-messaging and mobile telecommunication: A joint market? - An empirical approach," DICE Discussion Papers 256, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
    9. Juan Vélez, 2017. "Merger Effects with Product Complementarity: Evidence from Colombia’s Telecommunications," Borradores de Economia 1018, Banco de la Republica de Colombia.

    More about this item


    call externalities; demand structure; network effects; positive feedback effects; text messaging;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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