Mobile and fixed substitution for telephone service in China

A panel of province by year data for China from 1998 to 2007 is used to estimate own- and cross-price elasticities for fixed and mobile telephone service. Identification is achieved through the use of measures of the level of competition and privatization of the industry. Moreover, using neighboring province values ensures instrumental variable exogeneity. Estimates suggest that fixed and mobile subscriptions are fairly strong substitutes. This provides evidence for the development of competition between these platforms.