Telephone Demand: A Theoretical Approach and its Application to the Portuguese Case

• Autor(a) principal: Telhado Pereira, Pedro
• Data de Publicação: 1991
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/85387

We develop a theoretical model which explains the joint decision for joining a telephone network and using it. We arrive at testable propositions and use data for the Portuguese telephone services to test them. Results suggest that positive network externalities are very important. A 10% increase in the network would increase the demand for access by 7-8% in the long run and an increase in traffic by 6-7% in the long run (assuming constant population). The income elasticity for traffic is greater than one in the long run. Both these results imply a strong pressure in the telephone network and a need for planning so that the quality of the services does not deteriorate.