Estimating demand for cellular phone services in Japan

Since the 1990s, the telecommunications industry has changed dramatically with the wide diffusion of mobile telecommunications. In spite of this, the nature of the cellular phone market has not yet been explored sufficiently. This paper analyzes the demand for cellular phone services using data on the Japanese cellular phone market in the late 1990s. It finds that the market is highly product-differentiated and conventional network externalities are no longer decisive factors in choosing a mobile phone carrier. The evidence also shows that the demand for cellular phone services is quite price-elastic, with estimated elasticity from 1.30 to 2.43 in absolute value.