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Estimating critical mass in the global cellular telephony market

Author

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  • Michal Grajek

    (ESMT European School of Management and Technology)

  • Tobias Kretschmer

    (Ludwig-Maximilians-Universität München)

Abstract

Critical Mass is a common feature of technology diffusion processes. We develop a structural model of demand with network effects to provide a rigorous definition of critical mass as a function of installed base, price and network effects. Using data from the digital cellular telephony market, we identify critical mass phenomena and find that differences in the critical mass point in different countries rest mainly on different countries’ socioeconomic characteristics and the extent of competition in a country. This application illustrates that our demand model can be operationalized easily and can generate theoretically grounded empirical insights about critical mass phenomena.

Suggested Citation

  • Michal Grajek & Tobias Kretschmer, 2008. "Estimating critical mass in the global cellular telephony market," ESMT Research Working Papers ESMT-08-004 (R1), ESMT European School of Management and Technology, revised 15 Apr 2010.
    • Handle: RePEc:esm:wpaper:esmt-08-004
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    References listed on IDEAS

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    Cited by:

    1. Lechman, Ewa, 2014. "The ‘technological take-off’ and the 'critical mass'. A trial conceptualization," MPRA Paper 59506, University Library of Munich, Germany.
    2. A. Laura Baraldi, 2012. "The size of the critical mass as a function of the strength of network externalities: a mobile telephone estimation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(4), pages 373-396, June.
    3. Nina Czernich, 2011. "The emergence of broadband internet and consequences for economic and social development," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 37.

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    More about this item

    Keywords

    critical mass; network effects; technology diffusion; cellular telephony;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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