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Text and voice : complements, substitutes or both?

Andersson, Kjetil; Foros, Øystein; Steen, Frode
Working paper
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URI
http://hdl.handle.net/11250/162670
Date
2005
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  • Discussion papers (SAM) [582]
Abstract
Text messaging has become an important revenue component for European and Asian mobile

operators. We develop a simple model of demand for mobile services incorporating the

existence of call externalities and network effects. We show that when incoming messages

and calls stimulate outgoing communications, services that are 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 tha t 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.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2005:27

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