Essays on Telecommunications Management: Understanding Consumer Switch, Search and Purchase Behaviors

Digitization has been pervasively reshaping the landscape of home-based telecommunication industries. The massive disruptive challenges call for telecom companies to react with efficient strategic managerial policies. Meanwhile, how consumer decision makings and welfare are impacted by such policies often remains complicated and non-transparent to policy makers. My thesis aims at leveraging large-scale empirical data to investigate the impacts of several prevalent firm initiated strategies on both sides of the market, i.e. consumers and firms. The thesis is comprised of three studies focusing on consumer switch, search and purchase behaviors. The first study, centering at consumer switching behaviors, investigates the impact of lock in shortening policies on both firm profits and consumer welfare in home-based telecommunication service market. Using household level data from a large telecommunications service provider, we show that a market level policy that shortens the lock-in period from the status quo can decrease the profits on the firms side more than it increases consumer surplus. This is majorly caused by the substantial acquisition costs associated with user switching and service initiation. As a result if regulators shorten lock-in periods but then firms respond by collaboratively increasing prices to recover their rate of return, the consumers, as the analyses indicate, may be worse off compared to the world in which lock-in periods do not change. Therefore lock-in reduction policy need to be paired with a policy precluding operators from increasing prices too much. The later two studies jointly examine consumer’s search and purchase behaviors in social environment. With a wide scope of services, telecommunication service providers can often leverage their knowledge on consumer’s social environment to reshape consumer choices. We aim to understand how consumers combine different sources of social information, one from friends versus one from the crowd, as a function of how close they are to the point of conversion. We developed a dynamic structural econometric model that jointly describes consumer information search and product purchase while taking into account sequential arrival of information and non-negligible search costs. The model is then instantiated on two connected yet distinct empirical contexts, where consumers shop for movies to watch on home screens. The first empirical context (discussed in the second study in this thesis) lies in an observational setting, where we studied individual level clickstream and transactional data from a Video-on- Demand service platform operated by a large telecommunication service provider. Later in the third study, we created an artificial movie market and leveraged a randomized web experiment to further study the research questions with more solid identification support. We find that, in both contexts, consumers seem to start by browsing products they heard about from friends. The popularity signals become more relevant when consumers getting closer to the point of purchase. The results have important managerial implications to online vendors by suggesting a reasonable strategy of providing the most valuable social information at the right time to enhance consumer shopping experiences.