A Dyad Model of Calling Behaviour with Tie Strength Dynamics
University of Toronto - Rotman School of Management
University of Southern California - Marshall School of Business
Hong Kong University of Science & Technology - Department of Marketing
September 30, 2009
NET Institute Working Paper No. 09-12
This paper investigates the dynamic relation between callers' social ties and their wireless phone service consumption. We construct a large pair-level panel dataset with information on the number of each pair's common contacts, calling activities, prices, and each caller's characteristics over a one-year time period. We estimate a dynamic model that encapsulates the evolving relationship between each pair of consumers. We find the amount of communications between a pair of consumers increases with the strength of their tie, which is higher when these two consumers share more common contacts. Our results support the reciprocity rule in telephone calls, i.e. when individual A initiates more (less) phone calls to individual B in one month, their social tie will be strengthened (weakened) and individual B will make more (less) calls to individual A in the subsequent months. We demonstrate the implications of our results in evaluating the return of temporary price promotions and designing price plans. Our results underscore the importance of incorporating social network characteristics in the study of telecommunications markets.
Number of Pages in PDF File: 47
Keywords: Social Network, Tie-strength, Reciprocity, Wireless Phone Service
Date posted: October 4, 2009 ; Last revised: October 13, 2009
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