Title: Measuring network effects in mobile telecommunications markets with stated-preference valuation methods

Authors: Miko?aj Czajkowski; Maciej Sobolewski

Addresses: Faculty of Economic Sciences, University of Warsaw, D?uga 44/50, 00-241 Warsaw, Poland. ' Faculty of Economic Sciences, University of Warsaw, D?uga 44/50, 00-241 Warsaw, Poland

Abstract: This paper demonstrates how stated-preference methods can be applied for modelling consumers| preferences in mobile telecommunications, and for measuring network effects. This will be illustrated with a case study of mobile phone operators in Poland. A random parameters multinomial logit model will be constructed to analyse consumer preferences. This approach allows calculating welfare effects, as well as marginal rates of substitution of the attributes used to describe the choices, such as operator brand and distribution of family and friends among available mobile networks. The results confirm the existence of a strong network effect, which is related to the size of the social network a particular subscriber belongs to, rather than the absolute size of the mobile operator|s customer base. In addition, brand perception and brand loyalty will be identified as important determinants of operator choice. Finally, through the application of a non-market valuation method, monetary values of the network effect and of brand loyalty, will be calculated.

Keywords: network effects; mobile telecommunications; brand valuation; stated preference methods; non-market valuation methods; choice experiment; multinomial conditional logit model; preference heterogeneity; random parameter models; Poland; mobile communications; consumer preferences.

DOI: 10.1504/IJMNE.2011.043354

International Journal of Management and Network Economics, 2011 Vol.2 No.2, pp.197 - 215

Available online: 25 Oct 2011 *

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