Mobile telephony and internet growth: impacts on consumer welfare

Gary Madden, Michael Schipp and Joachim Tan

MPRA Paper from University Library of Munich, Germany

Abstract: Innovation in digital technology has allowed rapid growth in mobile telephone and Internet adoption among consumers. The implication underlying the high rates of subscription growth is that consumers generally place a high valuation on telecommunication services. Moreover, since mobile telephone and Internet are predominantly telecommunication services, it is reasonable to presume that the network effect may be largely responsible for this growth. The implication of the network effect, where the consumer’s valuation of service increases with the size of the network is that subscription growth is endogenous. However, to date there have been few attempts to measure the change in consumer welfare as networks increase. Following Hausman (1981), this paper measures the change in consumer surplus based on the compensating variations approach. The result is an annual measure of the change in consumer surplus for the representative consumer for the OECD region. In addition, the approach reveals whether marginal consumer surplus is a decreasing or increasing function of network size. Measurement of the change in consumer welfare thus provides an additional tool for public policy analysis.

Keywords: Consumer welfare; network effect; compensating variation (search for similar items in EconPapers)
JEL-codes: L96 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/14555/1/MPRA_paper_14555.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:14555

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().