Measuring quality-adjusted price changes on the mobile market: a case study from Hungary

Abstract

Purpose This study aims to estimate the quality-adjusted changes in residential mobile consumer prices by controlling for the changes in the relevant service characteristics and quality, in a case study on Hungary between 2015 and 2021; compare the results with changes measured by the traditionally calculated official telecommunications price index of the Statistical Office; and discuss separating the hedonic price changes from the effect of a specific government intervention that occurred in Hungary, namely, the significant reduction in the value added tax rate (VAT) levied on internet services. Design/methodology/approach Since the price of commercial mobile offers does not directly reflect the continuous improvements in service characteristics and functionalities over time, the price changes need to be adjusted for changes in quality. The authors use hedonic regression analysis to address this issue. Findings The results show significant hedonic price changes over the observed seven-year period of over 30%, which turns out to be primarily driven by the significant developments in the comprising service characteristics and not the VAT policy change. Originality/value This paper contributes to the literature on hedonic price analyses on complex telecommunications service plans and enhances this methodology by using weights and analysing the content-related features of the mobile packages.