Estimation of switching costs and network effects in mobile telecommunications in Poland
In this paper we utilize discrete choice experiment method to identify and measure switching costs and network effects in mobile telephony in Poland. Based on hypothetical choices consumers make we construct a conditional random parameters multinomial logit model to analyze their preferences. In our choice design we explicitly account for status quo inertia, number portability, operator brand, network distribution of most frequently called parties and price of on-net and off-net calls. Stated preference approach allows us to calculate marginal rates of substitution and hence implicit prices of the non-price attributes used to describe choices and switching behavior. Results of our study indicate that although choices of mobile operators are largely driven by price of calls, switching costs and network effects have and strong impact on utility of subscribers. In particular users assign positive value to their mobile phone number and the size of family and friends group in the same network. The monetary value of phone number is significantly higher among individual entrepreneurs then residential subscribers. In our model switching behavior is not discouraged by brand loyalty which turned out to be insignificant. Instead subscribers follow status quo inertia which reflects uncertainty associated with new operator. Therefore we conclude that despite introduction of mobile number portability, switching costs continue to be an important issue in telecommunications markets. On recommendations level, we argue that regulatory and competition policies should continue to reduce uncertainty associated with changing operator by ensuring service and platform compatibility and reducing tariff complexity. In light of our results we recommend tariffs to be non-discriminatory so that operators are unable to utilize network effects in a way which discourages switching behavior.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.itseurope.org/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph Farrell & Garth Saloner, 1985.
"Standardization, Compatibility, and Innovation,"
RAND Journal of Economics,
The RAND Corporation, vol. 16(1), pages 70-83, Spring.
- Czajkowski, Mikolaj & Sobolewski, Maciej, 2010.
"Measuring Network Effects in Mobile Telecommunications Markets with Stated‐Preference Valuation Methods,"
21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation
5, International Telecommunications Society (ITS).
- Miko?aj Czajkowski & Maciej Sobolewski, 2011. "Measuring network effects in mobile telecommunications markets with stated-preference valuation methods," International Journal of Management and Network Economics, Inderscience Enterprises Ltd, vol. 2(2), pages 197-215.
- Sean Lyons, 2006. "Measuring the Benefits of Mobile Number Portability," Trinity Economics Papers tep2009, Trinity College Dublin, Department of Economics.
- repec:cup:cbooks:9780521766555 is not listed on IDEAS
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
- Paul Klemperer & Joseph Farrell, 2006.
"Coordination and Lock-In: Competition with Switching Costs and Network Effects,"
Economics Series Working Papers
2006-W07, University of Oxford, Department of Economics.
- Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
- Farrell, Joseph & Klemperer, Paul, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," CEPR Discussion Papers 5798, C.E.P.R. Discussion Papers.
- Joseph Farrell & Paul Klemperer, 2006. "Co-ordination and Lock-in: Competition with Switching Costs and Network Effects," Economics Papers 2006-W07, Economics Group, Nuffield College, University of Oxford.
- Farrell, Joseph & Klemperer, Paul, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Competition Policy Center, Working Paper Series qt9n26k7v1, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Nicholas Economides, 1997.
"The Economics of Networks,"
Brazilian Electronic Journal of Economics,
Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
- Richard Carson & Nicholas Flores & Norman Meade, 2001.
"Contingent Valuation: Controversies and Evidence,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 19(2), pages 173-210, June.
- Carson, Richard T & Flores, Nicholas A, 2000. "Contingent Valuation: Controversies and Evidence," University of California at San Diego, Economics Working Paper Series qt75k752s7, Department of Economics, UC San Diego.
- Liikanen, Jukka & Stoneman, Paul & Toivanen, Otto, 2004. "Intergenerational effects in the diffusion of new technology: the case of mobile phones," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1137-1154, November.
- Lee, Jongsu & Kim, Yeonbae & Lee, Jeong-Dong & Park, Yuri, 2006. "Estimating the extent of potential competition in the Korean mobile telecommunications market: Switching costs and number portability," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 107-124, January.
- Lukasz Grzybowski & Pedro Pereira, 2011. "Subscription Choices and Switching Costs in Mobile Telephony," Review of Industrial Organization, Springer, vol. 38(1), pages 23-42, January.
- Klemperer, Paul D, 1987. "Entry Deterrence in Markets with Consumer Switching Costs," Economic Journal, Royal Economic Society, vol. 97(388a), pages 99-117, Supplemen.
- Mengze Shi & Jeongwen Chiang & Byong-Duk Rhee, 2006. "Price Competition with Reduced Consumer Switching Costs: The Case of "Wireless Number Portability" in the Cellular Phone Industry," Management Science, INFORMS, vol. 52(1), pages 27-38, January.
- Nakamura, Akihiro, 2010. "Estimating switching costs involved in changing mobile phone carriers in Japan: Evaluation of lock-in factors related to Japan's SIM card locks," Telecommunications Policy, Elsevier, vol. 34(11), pages 736-746, December.
- Michal Grajek, 2007.
"Estimating network effects and compatibility in mobile telecommunications,"
ESMT Research Working Papers
ESMT-07-001, ESMT European School of Management and Technology.
- Michal Grajek, 2003. "Estimating Network Effects and Compatibility in Mobile Telecommunications," CIG Working Papers SP II 2003-26, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 375-94, May.
- V. Brian Viard, 2007.
"Do switching costs make markets more or less competitive? The case of 800-number portability,"
RAND Journal of Economics,
RAND Corporation, vol. 38(1), pages 146-163, 03.
- Viard, V. Brian, 2005. "Do Switching Costs Make Markets More or Less Competitive? The Case of 800-Number Portability," Research Papers 1773r3, Stanford University, Graduate School of Business.
- Sobolewski, Maciej & Czajkowski, MikoŁaj, 2012. "Network effects and preference heterogeneity in the case of mobile telecommunications markets," Telecommunications Policy, Elsevier, vol. 36(3), pages 197-211.
- repec:cup:cbooks:9780521747387 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:zbw:itse13:88515. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.