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ICC Advance Access published online on June 29, 2009
Industrial and Corporate Change, doi:10.1093/icc/dtp034
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© The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved.

Text and voice: complements, substitutes or both?

K. Andersson, Ø. Foros and F. Steen

Correspondence: Kjetil Andersson, Telenor R&D. e-mail: kjetil.andersson{at}telenor.com

Correspondence: Øystein Foros, Norwegian School of Economics and Business Administration (NHH), Department of Finance and Management Science, Hellev. 30, N-5045 Bergen, Norway. e-mail: oystein.foros{at}nhh.no

Correspondence: Frode Steen, Norwegian School of Economics and Business Administration and CEPR. e-mail: frode.steen{at}nhh.no

Text messaging has become an important revenue component for most mobile operators. We develop a simple model of demand for mobile services incorporating dynamics of information exchange. We show that when incoming communication stimulate outgoing communication, services that initially may be perceived as substitutes, such as mobile text and voice, may evolve into complements in terms of the price effect when the network size becomes large. We estimate the demand for text messaging in the Norwegian market and find that the cross-price effect of voice depends on the network size. Voice is a substitute for text messages for small network sizes, and a complement for large network sizes.


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