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Evaluating mobile number portability policy in the Thai mobile telecommunications market

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Abstract

Mobile number portability (MNP), which allows consumers to retain their mobile numbers when switching service providers, is expected to promote competition by lowering switching costs. This paper estimates switching costs and switching costs reduction from the MNP policy in Thailand using the mixed logit model with preference heterogeneity on a nationwide survey of mobile telecommunications service usages. The estimation result shows that the MNP policy reduces switching costs by 37% on average and that this benefit is heterogeneous across consumers. The considerable and persistent switching costs call for additional measures to facilitate switching.

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Notes

  1. The average marginal effect is estimated using the logit model of switching decision with the following independent variables: MNP dummy variable, previous service provider dummy variables, age, age squared, income, income squared, education dummy variables, and quadratic trend.

  2. The routine was developed by Hole (2007). The simulation generates 100 Halton draws. Many studies such as Train (2000) and Bhat (2001) have shown that a small number of Halton draws may provide more precise estimates. See Kenneth (2009) for discussion on the number of Halton draws.

  3. The models can also be estimated with conditional logits but Hausman–McFadden test rejects the null hypothesis of IIA property. The mixed logit model is used to allow a violation of the IIA property.

  4. One may restrict the price coefficient to be negative using the log-normal distribution. However, even with the assumption of normality, the estimated distribution is practically one-sided as shown in Fig. 4c. Besides, the log-normal specification yields only slightly smaller switching costs and switching costs reduction in compensating variation terms. Thus, the main conclusions remain the same.

  5. The figure shows kernel density estimates of the conditional distributions simulated with the method developed by Revelt and Train (2000) with 500 draws. Bandwidths for switching costs, switching costs reduction and price coefficient are 0.5, 0.1 and 0.0002 respectively.

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Authors and Affiliations

  1. Faculty of Economics, Chulalongkorn University, Bangkok, Thailand

    Pacharasut Sujarittanonta

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  1. Pacharasut Sujarittanonta
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Correspondence to Pacharasut Sujarittanonta.

Additional information

I gratefully acknowledge financial support from Chulalongkorn Economic Research Center at the Faculty of Economics, Chulalongkorn University. I thank anonymous referees, Warn N. Lekfuangfu, and seminar participants at the 11th AsLEA Annual Conference and 2016 PIER Research Workshop for helpful comments.

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Sujarittanonta, P. Evaluating mobile number portability policy in the Thai mobile telecommunications market. J Regul Econ 51, 220–233 (2017). https://doi.org/10.1007/s11149-017-9326-x

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  • DOI: https://doi.org/10.1007/s11149-017-9326-x

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