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Switching Costs and Network Effects – How Much Do they Really Matter in Mobile Telecommunications?

Mikolaj Czajkowski and Maciej Sobolewski

No 2013-29, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: Our study focuses on the identification and the measurement of switching costs and network effects in mobile telecommunications. Although these two phenomena create similar consumer lock-in mechanisms, there are no empirical studies that integrate them into one model of subscriber’s behavior. Our study fills this gap by applying stated preference valuation methods to a representative sample of individual mobile phone users in Poland. We find that number portability can be attributed to only approximately 50% of the total switching costs associated with changing either the provider or the service and the remaining part is associated with status quo inertia. Additionally, we show that because network effects play an important role in service valuation, they lead to strengthening the lock-in mechanisms even further. Our study provides the first empirical measurements of the relative importance of these simultaneous effects and provides the estimates of their monetary value.

Keywords: Switching costs; network effects; mobile telecommunications; mobile number portability; brand valuation; stated preference; non-market valuation; discrete choice experiment; random parameters multinomial logit model (search for similar items in EconPapers)
JEL-codes: L1 L86 O3 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2013
New Economics Papers: this item is included in nep-com, nep-dcm, nep-net and nep-reg
References: View references in EconPapers View complete reference list from CitEc

Downloads: (external link) First version, 2013 (application/pdf)

Related works:
Journal Article: How much do switching costs and local network effects contribute to consumer lock-in in mobile telephony? (2016) Downloads
Working Paper: Estimation of switching costs and network effects in mobile telecommunications in Poland (2013) Downloads
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