The interdependent telecommunications demand and efficient price structure

Rapid growth of mobile telecommunications is a widespread phenomenon in the world. This emerging network is supposed to be closely interdependent with the wire-based network. In this paper, after reviewing the Japanese regula tory scheme for mobile telecommunications, we investigate the interdependen cy by estimating both price elasticities and network effects among them. Th e own-prier elasticities are relatively high, and the substitution, as well as the network, effect is substantial. Moreover, the resulting super-elast icities of mobile telephones are consistently larger than those of fixed-li ne telephones. These findings indicate that the Ramsey optimal price struct ure may have required a lower price-cost margin of mobile networks, relativ e to that of fixed-line networks. It should be noted, however, that the dif ference in super-elasticity between the two networks seems to have substant ially diminished during our sample period. (C) 1999 Academic Press. Journal of Economic Literature Classification Numbers: D12, L43, L96.