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Identifying Critical Mass in the Global Cellular Telephony Market

Authors/Editors: Grajek, M.
Kretschmer, T.
Published: 2012
Type: Articles in Refereed Journals (International)
ISBN/ISSN: 0167-7187
Published by: International Journal of Industrial Organization, 30(6), pp. 496-507


Technology diffusion processes are often said to have critical mass phenomena. We apply a model of demand with installed base effects to provide theoretically grounded empirical insights about critical mass. Our model allows us to rigorously identify and quantify critical mass as a function of installed base and price. Using data from the digital cellular telephony market, which is commonly assumed to have installed base effects, we apply our model and find that installed base effects were generally not strong enough to generate critical mass phenomena, except in the first cellular markets to introduce the technology.