Network Externality, Call Externality and Price Policy: A Consumer Development Analysis of China's 3G Mobile Data Services

The key to 3G data service development in the primary period is to expand the firm's number of subscribers and market share. However, price strategy is an important weapon for popularizing 3G data services to some extent. This chapter studies the price of 3G data services and market development under network externalities and call externalities. Consumer "self-selection" is induced in models of bundling tariffs and two-part tariffs. Then the optimal pricing strategies of the two pricing models are analyzed, and then the corresponding market development strategies are dropped from the optimal pricing strategy. The result shows that the optimal consumer development strategy is to draw high-demand consumers to becoming the firm's subscribers with a precedent in both pricing systems because of the effects of network externalities. Following the increase of the proportion of the firm's subscribers, the firm's development of low-demand consumers spreads out. Moreover, call externalities will reduce the firm's activity to serve low-demand consumers.