Network Externalities and Critical Mass in the Mobile Telephone Network: A Panel Data Estimation

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Executive Summary

This paper develops a simple demand model with network externalities which allow the authors to identify the shape of the network externalities function in the mobile telephone market and to estimate the critical mass. If the mobile telephone network exhibits positive network externalities, they expect that the demand curve is not downward sloping everywhere but it has an increasing part, the critical mass of the installed base of subscribers. Once the critical mass is reached, the growth of the network is self-sustaining.

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