A choice-based substitutive diffusion model for forecasting analog and digital mobile telecommunication service subscribers in Korea

The telecommunications market is expanding rapidly and becoming more substitutive. In this environment, demand forecasting is very difficult, yet important for both practitioners and researchers. In this paper, we adopt the modeling approach proposed by Jun and Park. The basic premise is that demand patterns result from choice behavior, where customers choose a product to maximize their utility. We apply a choice-based substitutive diffusion model to the Korean mobile telecommunication service market where digital service has completely replaced analog service. In comparison with Bass-type multigeneration models, our model provides superior fittng and forecasting performance. The choice-based model is useful in that it enables the description of such complicated environments and provides the flexibility to include marketing mix variables such as price and advertising in the regression analysis.