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Problems in Launching the Mobile Internet: Evidence From a Pricing Experiment
Author(s) -
Gao Maija,
Hyytinen Ari,
Toivanen Otto
Publication year - 2014
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12062
Subject(s) - commercialization , mobile phone , the internet , economic surplus , internet access , business , connection (principal bundle) , marketing , advertising , economics , econometrics , telecommunications , microeconomics , computer science , mathematics , market economy , geometry , world wide web , welfare
Commercialization of innovations frequently stumbles. A prominent recent example are the early (i.e., pre‐3G) mobile phone‐enabled Internet services, whose European take‐up was slower than expected. To determine why, we build a structural model of demand for such services and estimate it using consumer‐level panel data from a pricing experiment. The experiment allows a decomposition of the number of wireless connections into the number of needs—instances where a consumer would establish a connection if the price were zero—and the conditional probability of establishing a connection. We find that needs were plenty and potential consumer surplus several magnitudes higher than that attained. We find that pricing reduced usage substantially and explore potential reasons for the high prices.