Estimating consumer surplus in the mobile telecommunications market: The case of Korea

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This paper estimates consumer surplus in the Korean mobile telephone services (MTS) market. The Korean mobile telecommunications market has grown rapidly since 1997 when competition was introduced and Code Division Multiple Access (CDMA) technology was commercialized. Because consumer surplus is relevant to the controversy over establishing an appropriate price level between consumers and service providers, the need for a robust measurement of benefit from NITS is increasing. The measured net consumer surplus estimated by means of elasticities of demand reached about US$48.8 billion in the period 1996-2004 and the changes amounted to about US$8.8 billion during the same period. In particular, after competition was introduced into the market with an accompanying price decrease and increase in the number of subscribers, consumers have benefited greatly. Therefore, it can be inferred that a facility-based competition policy and the reduction in price of access such as handset subsidies all played a positive role in the early diffusion of NITS in Korea. The estimated consumer surplus in this paper does not include network externality (option externality); if this were considered, the total social welfare of the consumer would be larger. (c) 2006 Elsevier Ltd. All rights reserved.
Publisher
ELSEVIER SCI LTD
Issue Date
2006
Language
English
Article Type
Article
Keywords

DEADWEIGHT LOSS; SERVICES

Citation

TELECOMMUNICATIONS POLICY, v.30, no.10-11, pp.605 - 621

ISSN
0308-5961
DOI
10.1016/j.telpol.2006.09.003
URI
http://hdl.handle.net/10203/92184
Appears in Collection
MG-Journal Papers(저널논문)
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