The thesis deals with the phenomenon of applying hedonic approach for exploring the changes in cell phone plan price and quality during adverse market conditions. Namely, since 2009, the Croatian mobile market has been subject to various negative influences, including the global economic crisis and a 6% government tax on mobile operator gross revenues on calls and messaging. Together these influences likely explain why, in 2010, the mobile telecommunications industry experienced a drop in annual call and SMS volumes for the first time in history; these influences likely led operators to rethink their cell phone plans pricing and quality strategies.
The present study took advantage of this tumultuous period to examine the relationship between monthly cell phone plan prices and technological characteristics in Croatia from 2009 to 2013. In order to model the numerous factors that can affect cell phone users’ behavior, author used hedonic modeling to calculate hedonic price and quality indices over the period. The results indicate that, despite the negative market conditions, monthly cell phone plan prices slowly fell rather than rose, and that plan quality increased. These results suggest that in order to compensate for loss of revenue and to maintain market share, the three major mobile operators in Croatia adopted a similar strategy of price reduction, differed in important quality details that may have affected their market share. This appears to have helped the three operators protect their market share. A similarly slow fall in prices has also occurred in other Central and Eastern European countries with similar market conditions, raising the possibility that operators in those countries adopted a similar strategy. These findings may be useful to guide operators as they adjust cell phone plan prices and quality in order for optimal market positioning. The hedonic model presented in this study can be used as a complement to existing methods for capturing price and quality changes on telecommunication market.
Congratulations to Ivan!