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Intra-household effects on demand for telephone service: Empirical evidence

Ching-I Huang

Quantitative Marketing and Economics (QME), 2013, vol. 11, issue 2, 231-261

Abstract: Abstract Knowing the determinants of consumption decisions is important for targeted marketing. This paper proposes a method to study household adoption of network goods. I empirically investigate the factors which affect the interactions among household members in the choice of telephone service using a game-theoretical model. The proposed semiparametric maximum likelihood estimator accounts for potential multiple Nash equilibria. I apply the method to study the subscription decisions for cellular phone service in Taiwan. On average, a consumer’s probability of subscribing to cellular service rises 13 percentage points when the other household member chooses to subscribe, suggesting the existence of intra-household network effects. Moreover, the intra-household effect is heterogeneous among households. It increases in household income, but decreases in the number of children and the age difference within a household. Firms can substantially increase the effectiveness of a marketing strategy by targeting on the observed consumer characteristics.

Keywords: Consumption externality; Multiple Nash equilibria; Demand estimation; Mobile phone service; Network effect; Targeted marketing (search for similar items in EconPapers)
JEL-codes: C31 D12 M31 (search for similar items in EconPapers)
Date: 2013
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Journal Article: Intra-household effects on demand for telephone service: Empirical evidence (2013) Downloads
Working Paper: Intra-Household Effects on Demand for Telephone Service: Empirical Evidence (2008) Downloads
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