Resubmitted, Review of Economic Studies
This paper develops a method to estimate and simulate the adoption of a network good. I estimate demand for mobile phones as a function of individuals’ social networks, coverage, and prices, using transaction data from nearly the entire network of Rwandan mobile phone subscribers over 4.5 years. I estimate the utility of adopting a phone based on its eventual usage: subscribers pay on the margin, so calls reveal the value of communicating with each contact. I use this structural model to simulate the effects of two policies. A requirement to serve rural areas lowered operator profits but increased net social welfare. Developing countries heavily tax mobile phones, but standard metrics that neglect network effects understate the true welfare cost in a growing network. Shifting from handset to usage taxes would have increased the surplus of poor users, without reducing government revenues or the surplus of richer users.
Media coverage: NPR Morning Edition
Many households in developing countries lack formal financial histories, making it difficult for banks to allocate capital, and for potential borrowers to obtain loans. However, many unbanked households have mobile phones, and even prepaid phones generate rich data about their behavior. This project shows that behavioral signatures in mobile phone data predict default with accuracy approaching that of credit scoring methods that rely on financial histories. The method is demonstrated using call records matched to loan outcomes for a sample of borrowers in a Caribbean country.
A central task in microeconomics is to predict choices in as-yet-unobserved situations (e.g., after some policy intervention). Standard approaches can prove problematic when sufficiently similar changes have not been observed or do not have observable exogenous causes. We explore an alternative approach that generates predictions based on relationships across decision problems between actual choice frequencies and non-choice subjective evaluations of the available options. In a laboratory experiment, we find that this method yields accurate estimates of price sensitivities for a collection of products under conditions that render standard methods either inapplicable or highly inaccurate.
Although the spread of new technologies is vital for economic development, it is difficult to study with traditional sources of data. The mobile phone represents a new technology which automatically records every potential learning experience, and nearly every remote interaction with peers who could share their own learning experiences. In 2006, a Rwandan mobile phone operator introduced a new plan that represented substantial savings for over 85% of subscribers. This project uses operator data to investigate how individuals learned about this new plan, and aims to differentiate between learning by doing, from the experience of social network neighbors, and from official sources.
Competition in Network Industries: Evidence from Mobile Telecommunications in Rwanda
When analyzing cellular network usage, data on cell tower locations may not be complete. This document outlines a simple procedure to estimate the geographical locations of unknown towers based on call handoffs with known towers.