K.H. Tiedemann (Canada)
Personal communications services, cell phones, mobile telephone demand.
The rapid diffusion of wireless services has generated considerable value for business and residential customers. A number of studies have examined the demand for wireless services using econometric models, but these papers focus on wireless access or subscriptions, and there are few estimates of the demand for mobile telephone services using cross-country regression models. The purpose of this paper is to help fill this gap by developing a theoretical model of consumer demand for wireless services and estimating the model using cross section data for the OECD countries. The paper makes the following contributions to the literature. First, the paper develops and applies the theory of household production to establish conditions under which an aggregate demand equation for wireless services is meaningful. Second, the paper estimates several demand equations using an appropriate econometric procedure when the residuals exhibit heteroscedasticity. Third, the paper estimates price, income and subscriber elasticities, which summarize demand response to marginal changes in the forcing variables in the demand equation. Fourth, the paper compares the result of the present modelling with similar models employing cross section econometric analysis.
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