Me and you and everyone we know: an empirical analysis of local network effects in mobile communications

This paper investigates the importance that consumers assign to local network effects, i.e. the extent to which they take account of their contacts’ mobile operators when choosing a provider for themselves. The authors identify individual characteristics that affect the importance consumers attach to local network effects. The study relies on a survey of 193 Italian students. The results show that consumers are highly heterogeneous with respect to the importance they give to their the operators chosen by their friends/family members in choosing which provider to use. This heterogeneity is associated with individual innovativeness and patterns of mobile phone usage. For instance, consumers who are more interested in local network effects are typically early adopters, who use voice services intensively and carefully screen the available offerings in order to identify the tariff plan that best suits their needs. Consumers who pay attention to local network effects, spend comparatively little proportional to the intensity of their mobile usage.