Simulating Discount-Pricing Strategies for the GSM-Mobile Market

Abstract

The article analyzes network effects on the German GSM mobile telephonymarket. The authors use an ACE-approach to examine how a new competitorcan successfully gain ground in the market with a discount-pricingstrategy. In particular they study the impact of several elements of amobile phone contract like on-net-, landline- or off-net-fees on thecompetitor's market share. It turns out that it is possible tosuccessfully enter the market with a prepaid contract using adiscount-pricing strategy where the single fees only marginally exceedthe termination rates, which have to be transferred to foreign networkoperators.