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Cell Phone Demand and Consumer Learning – An Empirical Analysis

Author

Listed:
  • Martin Gaynor

    () (H. John Heinz III School of Public Policy and Management Carnegie Mellon University)

  • Yunfeng Shi

    () (H. John Heinz III School of Public Policy and Management Carnegie Mellon University)

  • Rahul Telang

    (H. John Heinz III School of Public Policy and Management Carnegie Mellon University)

  • William Vogt

    (H. John Heinz III School of Public Policy and Management Carnegie Mellon University Author-Workplace-Homepage)

Abstract

A structural model is used in this paper to analyze the demand and learning behavior in cell phone market. We assume that the cell phone consumption can be divided into a high-value part and a low-value part. The consumers are assumed to be uncertain about the exogenous shock of the need for high-value usage and also their preferences over the low-value usage. Meanwhile, we assume that the consumers’ knowledge improves over time. As a result, the match between their plan choice and consumption pattern becomes better. Such a learning behavior is supported by the data set. Bayesian updating is used to represent the learning. The estimates of the parameters are obtained and compared to the benchmarks from previous research.

Suggested Citation

  • Martin Gaynor & Yunfeng Shi & Rahul Telang & William Vogt, 2005. "Cell Phone Demand and Consumer Learning – An Empirical Analysis," Working Papers 05-28, NET Institute, revised Oct 2005.
  • Handle: RePEc:net:wpaper:0528
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    References listed on IDEAS

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    1. Carlos Martins-Filho & John W. Mayo, 1993. "Demand and Pricing of Telecommunications Services: Evidence and Welfare Implications," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 439-454, Autumn.
    2. Daniel A. Ackerberg, 2003. "Advertising, learning, and consumer choice in experience good markets: an empirical examination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1007-1040, August.
    3. Eugenio J. Miravete, 2002. "Estimating Demand for Local Telephone Service with Asymmetric Information and Optional Calling Plans," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 943-971.
    4. McFadden, Daniel L & Train, Kenneth E, 1996. "Consumers' Evaluation of New Products: Learning from Self and Others," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 683-703, August.
    5. Nakil Sung & Yong-Hun Lee, 2002. "Substitution between Mobile and Fixed Telephones in Korea," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(4), pages 367-374, June.
    6. Kenneth E. Train & Daniel L. McFadden & Moshe Ben-Akiva, 1987. "The Demand for Local Telephone Service: A Fully Discrete Model of Residential Calling Patterns and Service Choices," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 109-123, Spring.
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    Cited by:

    1. Michael D. Grubb & Matthew Osborne, 2015. "Cellular Service Demand: Biased Beliefs, Learning, and Bill Shock," American Economic Review, American Economic Association, vol. 105(1), pages 234-271, January.

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