Demand in a Portfolio-Choice Environment: The Evolution of Telecommunications

50 Pages Posted: 22 Aug 2012 Last revised: 4 Jul 2019

See all articles by Jeffrey T. Macher

Jeffrey T. Macher

Georgetown University - McDonough School of Business

John W. Mayo

Georgetown University - McDonough School of Business

Olga Ukhaneva

Georgetown University - Center for Business and Public Policy

Glenn Woroch

University of California, Berkeley; Compass Lexecon; Georgetown Center for Business & Public Policy

Date Written: May 28, 2019

Abstract

The introduction of a new good (or service) often creates situations in which consumers may choose to consume an extant good, the new good, both goods, or neither. Understanding the evolution and determinants of consumer demand in these situations is especially important to marketing practices ranging from advertising to pricing. In this study, we draw upon a database of over 180,000 individual household choices of fixed and/or mobile telephone subscriptions over 2003-2010 to improve insight into both the structure and evolution of consumer demand in such portfolio-choice settings. Congruent with our underlying consumer utility model, we find that cellphone service complements household member mobility: Households that are more often ``on the go'' favor mobile services. We also find that fixed and mobile services are price substitutes, but the degree of substitution decreases over our sample period. Finally, we find both the presence of network effects and that own- and cross-price elasticities of fixed and mobile telephony services demonstrate marked differences among demographic groups and across income levels.

Keywords: telecommunications demand, fixed-mobile substitution

JEL Classification: D12, L96

Suggested Citation

Macher, Jeffrey T. and Mayo, John W. and Ukhaneva, Olga and Woroch, Glenn, Demand in a Portfolio-Choice Environment: The Evolution of Telecommunications (May 28, 2019). Georgetown McDonough School of Business Research Paper No. 2012-19, Available at SSRN: https://ssrn.com/abstract=2133424 or http://dx.doi.org/10.2139/ssrn.2133424

Jeffrey T. Macher

Georgetown University - McDonough School of Business ( email )

335 Hariri Building
Washington, DC 20057
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John W. Mayo

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
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(202) 687-7310 (Fax)

Olga Ukhaneva

Georgetown University - Center for Business and Public Policy ( email )

Washington, DC 20057
United States

Glenn Woroch (Contact Author)

University of California, Berkeley ( email )

Department of Economics
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HOME PAGE: http://elsa.berkeley.edu/~woroch/

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Georgetown Center for Business & Public Policy ( email )

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HOME PAGE: http://cbpp.georgetown.edu/

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