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Fixed and mobile broadband; Are they substitutes or complements?

Listed author(s):
  • Jinsoo Bae

    (Ohio State University)

  • Yun Jeong Choi

    (Yonsei University)

  • Jong-Hee Hahn

    (Yonsei University)

Registered author(s):

    This paper investigates whether fixed and mobile broadband services are substitutes or complements using firm-level panel data obtained from three major telecommunications operators in South Korea. We employ a multi-level demand model based on Hausman et al. (1994), which allow for the possibility of complementarity between differentiated services. The estimated price elasticities of demand indicate that mobile broadband is a (week) substitute for fixed broadband while fixed broadband is complementary to mobile broadband. This is in contrast with the previous studies based on logit models which essentially assume substitution between different technologies. This result implies that fixed and mobile internet services constitute distinctive antitrust markets at least in the early stage of mobile broadband development.

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    File URL: ftp://165.132.78.176/repec/yon/wpaper/2014rwp-68.pdf
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    Paper provided by Yonsei University, Yonsei Economics Research Institute in its series Working papers with number 2014rwp-68.

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    Length: 20pages
    Date of creation: Jul 2014
    Handle: RePEc:yon:wpaper:2014rwp-68
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    Web page: http://yeri.yonsei.ac.kr/
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    3. Ward, Michael R. & Woroch, Glenn A., 2010. "The effect of prices on fixed and mobile telephone penetration: Using price subsidies as natural experiments," Information Economics and Policy, Elsevier, vol. 22(1), pages 18-32, March.
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    12. Jang, Show-Ling & Dai, Shau-Chi & Sung, Simona, 2005. "The pattern and externality effect of diffusion of mobile telecommunications: the case of the OECD and Taiwan," Information Economics and Policy, Elsevier, vol. 17(2), pages 133-148, March.
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    14. Srinuan, Pratompong & Srinuan, Chalita & Bohlin, Erik, 2012. "Fixed and mobile broadband substitution in Sweden," Telecommunications Policy, Elsevier, vol. 36(3), pages 237-251.
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    16. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
    17. Ahn, Hyungtaik & Lee, Myeong-Ho, 1999. "An econometric analysis of the demand for access to mobile telephone networks," Information Economics and Policy, Elsevier, vol. 11(3), pages 297-305, September.
    18. Yannelis, Demetrius & Christopoulos, Apostolos G. & Kalantzis, Fotis G., 0. "Estimating the demand for ADSL and ISDN services in Greece," Telecommunications Policy, Elsevier, vol. 33(10-11), pages 621-627, November.
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