How does the entry of new firms change demand? An empirical estimation for a Thai telecommunications company

This paper uses cointegration, error correction mechanism (ECM) and causal effect techniques to estimate the demand for the services supplied by the Telephone Organization of Thailand (TOT). The entry of new competitors reduces access demand but increases usage demand in both long-run and short-run. Access and usage externalities exist and the former has stronger effects than the latter. It is also found that consumers initially overreact to increases in income and telephone subscription but they do not overreact to services price changes. Causality examination shows that the number of telephone subscribers and income cause demands for access and usage, vice verse. © 2005 Elsevier Inc. All rights reserved.