Essays on estimating network effects and switching costs

This thesis consists of three single-authored essays that address open research questions in the empirical analysis of network industries. In the first two chapters, I develop an empirical framework to disentangle different sources of consumer inertia. The use of a detailed data set allows me to identify preference heterogeneity from consumer type-specific market shares and switching costs from churn rates. Identification of a localized network effect comes from comparing the dynamics of distinct local markets. Applying my framework I disentangle the effects of switching costs and network effects in the US wireless industry. In a model with myopic consumers, estimates of switching costs range from USD 316 to USD 630. The willingness to pay for a 20%-point increase in an operator's market share is on average USD 22 per month. When consumers are allowed to be forward-looking, estimates of switching costs and network effects remain large and significant, but substantially smaller than in the myopic model. In the final chapter, I outline an empirical model of dynamic platform competition which can be used to analyze wireless carriers' pricing strategies