The effect of switching costs on prices: an application to the Peruvian mobile phone market

Tilsa Ore Monago

No 17-12, Working Papers from NET Institute

Abstract: Based on a game theoretical model I previously developed, I present some evidence of the effect of the unlocked-handset policy recently implemented in Peru based on market analysis and reduced form empirical methods using consumer panel data. From the market analysis, declining prices are observed with the implementation of the policy in January 2015, also the switching rate rocketed since then. To retain consumers and attract rival's consumers, companies responded also with very low on-net prices through their "private network" with unlimited minutes, which may have increased the network effects in the market. From my estimation, I found a significant negative effect of switching costs on demand for voice traffic (which suggest a positive effect of the unlocked-handset policy on demand) and positive network effects on the demand.

Keywords: switching costs; mobile telecommunications; unlocked-handsets policy (search for similar items in EconPapers)
JEL-codes: L13 L43 L96 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2017-12
New Economics Papers: this item is included in nep-com, nep-cta, nep-mkt and nep-pay
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