How much do switching costs and local network effects contribute to consumer lock-in in mobile telephony?. Issue 9 (September 2016)

• Record Type: Journal Article
• Authors: Czajkowski, Mikołaj; Sobolewski, Maciej
• Is Part Of: Telecommunications policy. Volume 40:Issue 9(2016)
• Page Start: 855
• Page End: 869
• Publication Date: 2016-09
• Subjects: Switching costs -- Local network effects -- Mobile telecommunications -- Mobile number portability -- Stated preference -- Discrete choice experiment -- Random parameters logit model; Telecommunication -- Periodicals; Télécommunications -- Périodiques; 384
• DOI: 10.1016/j.telpol.2015.10.001
• Languages: English
• ISSNs: 0308-5961

Abstract

Abstract: Our study focuses on the identification and measurement of switching costs and local network effects in mobile telecommunications. As these two phenomena are the two components of consumer lock-in, omitting one of them likely results in biased estimates of the second, limiting applicability to policy relevant questions. Yet, there have been only a few attempts to integrate them into one model of subscriber behavior. Our study adds to this stream of research by applying a discrete choice experiment designed specifically to model subscription choices on a representative sample of mobile phone users in Poland. We find that the effective prices of calls appear to be a major determinant of operator choice. Switching costs continue to affect consumer behavior despite the introduction of number portability. Local network effects represent a smaller, albeit significant, component of consumer lock-in. Subscribers are heterogeneous with respect to the magnitudes of both lock-in components. Highlights: Switching costs and local network effects in mobile telecommunications are examined. . A discrete choice experiment is used to model mobile service subscribers' choices. . The strength of the effects, including number portability, are estimated and valued. . We investigate preference heterogeneity and its impact on total consumer lock-in. .