Text and voice: complements, substitutes or both?

Text messaging has become an important revenue component for most mobile operators. We develop a simple model of demand for mobile services incorporating dynamics of information exchange. We show that when incoming communication stimulate outgoing communication, services that initially may be percei...

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Bibliographic Details
Published in:Industrial and corporate change 2009-12, Vol.18 (6), p.1231-1247
Main Authors: Andersson, K., Foros, Ø, Steen, F.
Format: Article
Language:English
Subjects:
Communication research
Estimates
Information economics
Mobile phones
Norway
Service introduction
Studies
Telecommunications
Telecommunications industry
Text messaging
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Summary:Text messaging has become an important revenue component for most mobile operators. We develop a simple model of demand for mobile services incorporating dynamics of information exchange. We show that when incoming communication stimulate outgoing communication, services that initially may be perceived as substitutes, such as mobile text and voice, may evolve into complements in terms of the price effect when the network size becomes large. We estimate the demand for text messaging in the Norwegian market and find that the cross-price effect of voice depends on the network size. Voice is a substitute for text messages for small network sizes, and a complement for large network sizes.
ISSN:0960-6491
1464-3650
DOI:10.1093/icc/dtp034