Intra-household effects on demand for telephone service: Empirical evidence
Journal
Quantitative Marketing and Economics
Journal Volume
11
Journal Issue
2
Pages
231
Date Issued
2013-06-01
Author(s)
Huang, Ching I.
Abstract
Knowing the determinants of consumption decisions is important for targeted marketing. This paper proposes a method to study household adoption of network goods. I empirically investigate the factors which affect the interactions among household members in the choice of telephone service using a game-theoretical model. The proposed semiparametric maximum likelihood estimator accounts for potential multiple Nash equilibria. I apply the method to study the subscription decisions for cellular phone service in Taiwan. On average, a consumer's probability of subscribing to cellular service rises 13 percentage points when the other household member chooses to subscribe, suggesting the existence of intra-household network effects. Moreover, the intra-household effect is heterogeneous among households. It increases in household income, but decreases in the number of children and the age difference within a household. Firms can substantially increase the effectiveness of a marketing strategy by targeting on the observed consumer characteristics. © 2012 Springer Science+Business Media New York.
Subjects
Consumption externality | Demand estimation | Mobile phone service | Multiple Nash equilibria | Network effect | Targeted marketing
Publisher
SPRINGER