Intersectoral point-to-point telecommunication flows: theoretical framework and empirical results

Based on a theoretical framework that derives information flows associated to economic and social transactions, intersectoral, point-to-point telecommunication flow functions are specified and estimated, using a very large data base on intra-LATA toll calls and a simultaneous equation estimation procedure that accounts for the endogeneity of reverse call flows. The effects of prices, distances, and market sizes vary significantly across intersectoral interactions, and so does the impact of reverse calls, pointing to different cases of information complementarity and substitutability. Flows always decrease with distance, pointing to complementarity between transportation and telecommunications. The demand for messages is always price-inelastic, while the demand for conversation minutes is always elastic. Overall, intra-residential calling appears to be most sensitive to telecommunication prices. Several areas for further research are outlined.  1998 Elsevier Science B.V. All rights reserved.