Quality-Adjusted Prices of Japanese Mobile Phone Handsets and Carriers' Strategies

In order to discuss oligopolists' strategic determination of quality-adjusted prices (QAPs), we conducted a hedonic regression analysis using adjacent periods and estimated the QAPs of mobile phone handsets sold in Japan between 2002 and mid-2007 for each carrier. We observed (1) a decreasing trend in QAP for each carrier, (2) a more rapid decrease in the QAPs of the two smaller carriers' handsets relative to that of the largest carrier, and (3) a turnover cycle of the QAPs between the two smaller carriers. If both small carriers decrease their QAPs at roughly the same time, neither will significantly increase their subscriber share, which can generate a turnover cycle of QAPs.