Text and Voice: Complements, Substitutes or Both?

Posted: 8 Dec 2009

See all articles by K. Andersson

K. Andersson

Telenor

Øystein Foros

Norwegian School of Economics (NHH) - Department of Business and Management Science

Frode Steen

Norwegian School of Economics (NHH) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 2009

Abstract

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.

Suggested Citation

Andersson, Kjetil and Foros, Øystein and Steen, Frode, Text and Voice: Complements, Substitutes or Both? (December 2009). Industrial and Corporate Change, Vol. 18, Issue 6, pp. 1231-1247, 2009, Available at SSRN: https://ssrn.com/abstract=1518781 or http://dx.doi.org/dtp034

Kjetil Andersson (Contact Author)

Telenor ( email )

Snarøyveien 30
N-1331 Fornebu
Norway

Øystein Foros

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Frode Steen

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 55 959 259 (Phone)
+47 55 959 543 (Fax)

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