The Effect of Market Structure on Cellular Technology Adoption and Pricing

42 Pages Posted: 8 Jun 2006 Last revised: 12 Jul 2012

See all articles by Katja Seim

Katja Seim

Yale School of Management

V. Brian Viard

Cheung Kong Graduate School of Business

Date Written: May 1, 2006

Abstract

We analyze the effect of entry on the technology adoption and calling plan choices of incumbent cellular firms. Focusing on the time period from 1996, when incumbents enjoyed a duopoly market, to 1998, when they faced increased competition from personal communications services (PCS) firms, we relate the adoption of digital technology and change in the breadth of calling plans to the amount of PCS entry experienced in different markets. Variation in geographic features contributes to the difficulty of building a sufficiently large wireless infrastructure network, providing effective instruments for endogenous entry decisions. Our results indicate that incumbents are more likely to upgrade their technology from analog to digital in markets with more entry. Consistent with increased digital technology adoption in more competitive markets, we find that incumbents in the process of digital upgrading also phase out a larger number of analog calling plans and introduce a larger number of digital calling plans in less concentrated markets.

Keywords: nonlinear pricing, entry, technology adoption, Telecommunications, market structure, price discrimination, technology diffusion

Suggested Citation

Seim, Katja and Viard, V. Brian, The Effect of Market Structure on Cellular Technology Adoption and Pricing (May 1, 2006). Stanford University Graduate School of Business Research Paper No. 1867(R). Available at SSRN: https://ssrn.com/abstract=907125 or http://dx.doi.org/10.2139/ssrn.907125

Katja Seim (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

V. Brian Viard

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China
86-10-8518-8858 (Phone)
86-10-8518-6800 (Fax)

HOME PAGE: http://english.ckgsb.edu.cn/faculty_content/brian-viard

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