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Strategic use of external benefits for entry deterrence: the case of a mobile telephony market

Mikolaj Czajkowski () and Maciej Sobolewski ()

No 2016-27, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: Recent models of network competition demonstrate the incentives of incumbents to reduce receiver benefits in rival networks through excessive off-net pricing. Theoretical reasoning behind strategic use of call externalities assumes that receiving calls contributes to consumer utility. This paper tests this critical assumption with choice data elicited from users of mobile telephones. We find that receiver benefits are a significant driver of subscription choices and assess customer base stealing effect encountered by the late entrant. Our findings confirm that call externalities can be used to limit late entrants’ growth as has been observed in many European mobile telephony markets.

Keywords: call externalities; personal network effects; entry deterrence; mobile telephony; stated preferences; discrete choice experiment (search for similar items in EconPapers)
JEL-codes: L1 L86 D62 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2016
New Economics Papers: this item is included in nep-com, nep-dcm, nep-mkt, nep-pay and nep-reg
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Downloads: (external link)
http://www.wne.uw.edu.pl/index.php/download_file/3083/ First version, 2016 (application/pdf)

Related works:
Journal Article: Receiver benefits and strategic use of call externalities in mobile telephony markets (2018) Downloads
Working Paper: Estimating call externalities in mobile telephony (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2016-27

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