Subscription choices and switching costs in mobile telephony

Abstract

In this article, we estimate the price elasticities of demand for subscription and consumer switching costs for mobile telephony. We use a panel data of Portuguese consumers to estimate a series of multinomial and mixed logit models. The demand for subscription is found to be elastic and switching costs are large. We use the structural model to perform several policy exercises. Switching costs and brand preferences are shown to be important elements of the market structure of mobile telephony. Price mediated network effects seem to be relatively less important. © 2011 Springer Science+Business Media, LLC.