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Submitted to:
Submitted
by :
Dept. of Commerce
Tapas
Tiwari
Tsetan
Angmo
Varun Kaw
Delhi University
Rahul Shah
Vaibhav
Gupta
Vikram
Singh
DIFFERENT TIERS OF
MOBILE PHONE
13
MAJOR HANDSET MAKER
COMPANIES IN INDIA 13
TAPPING A GLOBAL
CONTENTS
OPPORTUNITY AND
BRIDGING THE MOBILE
GENDER GAP 14
INTROD
UCTION
4
MOBILE
HANDS
ETS V/S
FDI
5
MOBILE
TELEDENSIT
Y
6
SURVEY RESULTS:
16
More Findings of
the survey:
16
SPECTRUM POLICY
RATE
17
OF
GROWT
OVERALL INVESTING
H OF
MOBILE ENVIRONMENT
DENSIT
Y
18
7 RELIGION AND
MOBILE PHONE
PRODU (HOW THEY MAKE
CTION
MONEY ?)
20
AND
EXPOR MOBILE PHONES
TS
8 AND ECONOMICS
GROWTH
20
DRIVER
S AND
CASE 1: CATCH THE
TREND
FISH 20
S
9
Calls and effect
DRIVER
S
POLICY
AND
INITIATI
VES
21
CASE 2 : SMARTPHONE
APPS FUEL BUSINESS 22
Attract new
customers
22
Improve customer
PRODU
service 23
CT
Create a revenue
SEGME
opportunity
NTATIO
N AND
23
DIFFER CASE 3: MOBILES FOR
ENT
FIGHTING POVERTY
23
TIERS
OF
MOBILE MARKET:
MOBILE BEHAVIOURAL
PHONE ECONOMICS
S
PERSPECTIVE
13
25
WHAT IS THE
BEHAVI
OURAL
ECONO
MICS
REVOL
UTION
ECONOMICS AND
EXPLORATION 25
Choice overload
OURAL
25
Heuristics 25
Endowment
25
25
BEHAVI
Defaults 25
MIB,
Economics
Department of
Page
Commerce,
|2
Delhi School of
d 27
Hyp
erb
olic
disc
oun
ting
25
Fra
min
g
bias
es
Heuristics 27
Endowment
27
Defaults 28
Hyperbolic
discounting
28
Framing biases
28
Risk/Loss aversion
29
APPENDIX A:
25 PRIMARY SURVEY
Risk QUESTIONS 30
/Los APPENDIX B:
s
BEHAVIORAL
ave ECONOMICS SURVEY
rsio
QUESTIONS 31
n
APPENDIX C:
25 FEEDBACK ABOUT
BEHAVI PRESENTATION
OURAL
ECONO
MICS
AND
BEHAVI
OURAL
BIAS
25
BEHAVI
OURAL
ECONO
MICS
AND
CONSU
MERS
26
32
BIBLIOGRAPHY
35
TABLE OF
FIGURES
FIGURE 1: FDI
PHONE 5
IN
MOBILE
Anc
hori FIGURE 2: MOBILE TELE
ng DENSITY 6
Effe FIGURE 3: PRODUCTION
ct AND EXPORTS OF MOBILE
26
PHONES IN INDIA
FIGURE 4: DISCARDING
Too
THE
PHONE
16
Muc
h
FIGURE 5: CONSUMER
Cho DECISION MAKING
ice 27
or FIGURE 6 : HYPERBOLIC
Cho
DISCOUNTING
28
ice
ove FIGURE 7: NORMATIVE
rloa POLICY MODEL 29
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
|3
3000
250
7
2500
FDI in USD(million)
2000
Sum of handset
sold(millions)
1500
1000
653
680
500
11617.5 129
0
32
66
85
94
rs
in
200
8
and
the
nu
mb
er
sta
nds
at
28
no
w!
., and Motorola.
Samsung
Electronics Co. Ltds
share rose marginally to
9.7% from 9.5%.
5
LGs
share
dropped from 7.2% to
6.4%,
6
Of the local
manufacturers,
Micromax leads the
race.
3
Fall
in
the
mar
ket
sha
re
of
No
kia,
L.G
MIB, Department of
Top
5
local
manufactures
are
Micromax,
Karbonn
Mobiles, Spice Mobiles
Ltd, Videocon Industries
Ltd
and
Lava
International Ltd.
Commerce, Delhi
School of Economics
Page|5
TELEWireless subscriber
DENS Total
base (GSM, CDMA &
ITY FWP) increased from
Figure
2:
Mobile
Tele
Density
An effective management
of mobile services requires
an understanding of the
factors that underlie the
evolution of the market.
Source :
Factors such as market
http://www.t
potential and timing and
rai.gov.in
speed of adoption are of
great
importance
for
telecom
operators
for
planning.
Accordin capacity
Understanding
the
g to
TRAIs evolution of mobile phone
Telecom market and its likely future
Subscript trend is equally important
ion Data for policy makers.
for the
month
The saturation level of
ending
mobile-density
for
a
May
2011, the country is likely to depend
on whether it is an early
Total
Telephon adopter or a late adopter
of
telephones.
Early
e
adopters
(developed
Subscrib
countries) are expected to
have
phones (due to high
lesser
switching cost) whereas
reliance late adopters (developing
on mobile
MIB,
Economics
Department of
Page
Commerce,
|6
Delhi School of
between
2011-12
and
2012-13 (when mobilecountries density is around 70).
)
areDuring the year 2015-16,
expected there will be 90 mobile
to have
phones for 100 people in
lesser
reliance the country. Analysis show
on mainthat the numbers of mobile
phones will exceed the
line
telephon number of people in the
es (duecountry by 2019-20
to
high
infrastruc
In this study, the growth of
ture
the mobile phone and
cost).
mobile-density in India has
been analyzed using SRate shaped growth curve
models.
The
analysis
of
growt shows that the high growth
phase of the diffusion of
h of mobile
phones
will
mobil continue till 2015-16. It is
eestimated that there will be
densi 90 mobile phones per 100
inhabitants in India at the
ty
end of year 2015-16. The
The
number of mobile phones
analysis
will exceed the number of
reveals
people in the country by
that the
2019-20.
Total
mobile
inflection
phone
demand
is
point (the
projected to increase from
maximum
800 million in 2010-11 to 1
growth
billion by 2012-13. Growth
rate
point) ofwhich is not expected to
the curveslow down anytime soon is
will occurnow moving to the rural
areas.
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
|7
Delhi School of
Economics
MIB,
Department of
Page
Commerce,
|8
of
mobile
phone
technologies, both in terms
of
performance
and
DRIV miniaturization. As a result,
many
other
ERS unlike
appliances, users change
AND their mobile phones on
TREN average every two years.
Consequently,
DS
replacement
handsets
today represent about 80%
all mobile
phone
Drive of
purchase.
rs
A
ll
5
Guidelines
for
telecom Unified Access Service
services License
regime
were
have
issued in November 2003,
been
27 licenses out of 31 Basic
opened Service Licenses were
up
forconverted
to
Unified
Access Service Licenses
free
competit
ion for6
In
April
2004,
unprece license fee for Unified
dented Access Service Providers
growth (UAS) was reduced by 2
per cent
2
2
17
7
License fee for
(Informati infrastructure
Provider-II
on
reduced from 15 per cent
Technolo to 6 per cent of the
gy
Adjusted Gross Revenue
Agreeme and spectrum charges
nt) ITA-Ibetween 2 to 4 per cent in
items areJune 2004
at
zero
Customs
8
Entry fee for NLD
Duty.
Specified licenses was reduced to
capital `2.5 Crore from `100
goods
Crore. Entry fee for ILD
and
allreduced to `2.5 Crore from
inputs
`25 Crore
required
to
Lease line charges
manufact 9
ure ITA-I,have been reduced to
items aremake
the
bandwidth
at
zeroavailable at competitive
Customs prices to facilitate growth
Duty
in IT enabled services
A 10
One India plan i.e.
vailabilit single tariff of `1/-per
y of lowminute to anywhere in
cost
mobile India was introduced from
handset 1st March 2006 by the
Public
Sector
s
Undertakings. This tariff
4
T was emulated by most of
the
private
service
he
providers
also.
This
internatio
nal Longscheme has led to death of
Distance distance
in
Services telecommunication and is
(ILDS)
opened going to be instrumental in
promoting
National
with
Integration
further.
effect
from April
2002.
11
The
robust
Calling
telecom
network
has
also
Party
facilitated
the
expansion
of
Pays
BPO
industry
that
is
(CPP)
having 500,000 employees
now and13
The Governments
adding policy is neutral on use of
400
technology by telecom
employee service providers subject
s per day. to availability of scarce
resources
such
as
12
A spectrum etc.
nnual
Licence Fees 6-10
license 14
per
cent
of Adjusted
fee
for
Gross Revenue (AGR)
National
Long
3. Foreign Direct
Distance Investment Policy:
(NLD),
Internatio Foreign Direct Investment
nal Long(FDI) was permitted in the
Distance telecom sector beginning
with
the
telecom
(ILD),
Infrastruc manufacturing segment in
1991
when
India
ture
embarked on economic
Providerliberalisation.
II, VSAT
commerci
FDI
is
defined
as
al
and
investment made by nonInternet
residents in the equity
Service
capital of a company. For
Provider
the telecom sector, FDI
(ISP) with
includes investment made
internet
by Non-Resident Indians
telephony
(NRIs),
Overseas
(restricte
Corporate Bodies (OCBs),
d)
foreign entities, Foreign
licenses
Institutional
Investors
was
(FIIs),
American
reduced
Depository
Receipts
to 6 per
(ADRs)/Global Depository
cent
of
Receipts (GDRs) etc.
Adjusted
Gross
Present FDI Policy for the
Revenue Telecom sector:
(AGR)
with effort In Basic, Cellular Mobile,
from JanNational Long Distance,
International Long
2006.
Distance, Value
Delhi School of
Economics
MIB,
Page
Department of
| 10
Commerce,
Foreign
Direct
Investment up to 74 per
Added cent permitted, subject to
and
security
Services licensing
requirements
for
the
and
following:
Global
Mobile 1Internet
Service
Personal (with gateways)
Communi
cations 2Infrastructure
by
Providers (Category II)
Satellite,
FDI
is3Radio
Paging
limited to Service
49
per
FDI up to 100 per cent
cent
(under permitted in respect to the
automatic following telecom services:
route)
ISPs not providing
subject to1gateways
(Both
for
grant of
satellite and submarine
licence
cables)
from the
Departm 2Infrastructure
ent
of Providers providing dark
Telecom fibre (IP Category I)
municatio
ns
and3Electronic Mail
adherenc
e by the4Voice Mail
companie
s
(whoThe above is subject to the
following conditions:
are
investing
FDI up to 100 per
and the1cent
is
allowed subject to
companie
the
condition
that such
s
in
companies
would
divest 26
which
per
cent
of
their
equity in
investme
favour
of
Indian
public
nt
is
within
5
years,
if
these
being
companies
are
listed
in
made) to
other
parts
of
the
world.
the
licence
2The
above
condition
services would be subject
s
for
to licensing and security
foreign
requirements, wherever
equity
required.
cap and
lock-in 3Proposals for FDI
period for beyond 49 per cent shall
be considered by Foreign
transfer
and
addition Investment Promotion
of equityBoard (FIPB) on a case-tocase basis.
and other
license
1
In
the
provision
manufacturing sector 100
s.
per cent FDI is permitted
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 12
P
R
O
D
U
C
T
S
E
G
M
E
N
T
A
T
I
O
N
A
N
D
D
I
F
F
E
R
E
N
T
OBILE
PHONE
S
Different Tiers
of Mobile
Phone
1
.
U
l
t
r
a
L
o
w
c
o
s
t
M
o
b
i
T
I
E
R
S
O
F
M
l
e
P
r
r
e
a
n
l
u
s
B
t
&
a
n
s
c
0
m
K
s
a
P
p
e
b
o
o
k
r
a
n
g
e
:
2
.
t
t
a
n
M
e
c
o
t
`
2
,
e
e
y
F
f
e
a
l
u
e
r
o
l
o
u
r
e
d
3. High-cost
Mobile:
Price range: Less than
`2,500 to `4,000
Handse gy development.
t:
Greater The India mobile
than
handsets market has
`4,000
got even more crowded
and fragmented in the
Key
features lower- and mid-market
include segments with the entry
:QWER of new players offering
TY
innovative models at
keypad/ attractive price points to
touch
screen, lure buyers. There is
huge demand for
dual
feature-rich, low-cost
SIM,
Wi-Fi,
handsets. Of the total
and 3G handset sales, the
majority of sales fall in
the price band of below
$75. That is where the
Sw
majority of the volume is
itch
and that is where you
ing
will see the majority of
pro
pe
the Indian and Chinese
nsit
manufacturers playing.
y
Going forward, the
fro
market is going to grow
m
at a rate of 15-20%
low
er
year-on-year. Low-cost
lev
devices will grab 60% of
el
the market over the next
se
three to four years.
gm
People are looking for
ent
to
devices with greater
the
value. That value could
mi
be in terms of features
d
like QWERTY keypad or
tier
touch screen etc. One
se
gm
can get a handset for
ent
Rs.2,000-3,000 with
is
features like good
ex
memory, touch screen,
pe
QWERTY, camera, dualcte
d
SIM, longer battery life
to
etc. The majority of
inc
Indian manufacturers
rea
are in the low-price
se
band and that is why
wit
h
market is looking quite
the
competitive. However, if
inc
they move up the price
rea
band, then they will face
se
competition from global
of
inc
players. When the low
om
end segment customers
e
go for repeat purchases,
lev
they go for low cost
el
mobile phones with
an
d
extra features. In fact,
tec
many of them are ready
hn
to pay higher prices for
olo
these
new
featur
es and
vendor
s are
taking
advant
age of
the
psych
e of
the
custo
mers
by
adding
these
featur
es.
Majo
r
Han
dset
Mak
er
Com
pani
es in
India
Blackberry
HTC
Sony Ericsson
Samsung
MIB,
Sony Ericsson
Motorola
Nokia
LG
Department of
Commerce,
Delhi School of
Economics
Page
| 13
Karbo
Lava
Micro
Spice
gap
Finnish There are 300 Million
handset Fewer Female than Male
Subscribers who have
maker
Nokia ismobile phone coverage
losing itsbut dont have a handset in
market the world which amounts
a
US$13
Billion
share into
Opportunity
as
well
as
India.
social
welfare.
Cost
and
Nokia
currently perception that it isnt
has
anecessary to own a mobile
market phone and fear of being
to
master
the
share ofable
36.3% attechnology are the biggest
the endbarriers to connecting
of Junemore women in developing
countries. By using mobile
2010
from 54%phones women can unlock
at
theeconomic
opportunities,
end
ofsave time and money,
June
increase
return
on
2009.Sec investment and maximize
ond
household resources.
biggest
player
Case Study:
happens Mera Mobile,
to
be
Samsung Mera Saathi
In November 2010, a
and
MicroMax village in Uttar Pradesh
has
banned unmarried women
surprising from using mobile phones.
ly
Here, and elsewhere in
become this region, mobile phones
the
3rdare seen as unwelcome
largest tools that enable women to
player
step beyond the confines
recently of traditional roles and
according social mores. This explains
to marketthe concept of behavioral
share.
economics.
Herein
thesocial, cognitive and
Tappi emotional factors helps in
ng a understanding the reason
the
globa for
economicdecision(to
buy
l
oppor or not to buy a mobile) of
individuals(women).Mobile
tunit penetration among women
y and in
many
developing
bridgi markets is consistently
low, with just 28% of Indian
ng
women in possession of a
the
mobile phone.
mobil
e
In an effort to bridge the
gend mobile gender gap in
India, Uninor joined forces
er
Sprea
ding
the
messa
ge
Distribution
of
20,000
calendars in rural UP and
Bihar
Gram
PraudyogikVikasSansthan
(GPVS), NGO partner,
Mera
pictorially depicting the
Mobile,
benefits of mobile phones
MeraSaat
to reinforce the message
hi
was
to the target audience
officially
throughout the year.
launched
in
Conducting quick quizzes
January among the village women.
2011, in(The one who can list five
the statesbenefits of mobile use will
of Uttarget a mobile handset and
a Uninor connection free.)
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 14
1. Income generation
2. Strengthening of
3.
4. Access
to new
information
on
health, education,
government
schemes
Building a more
sustainable future
By introducing rural Indian
women
to
telecommunications
and
its enabling effects, Uninor
aims to build a sustainable
future for the community.
Uninor employees also
share their time and
expertise in generating
awareness in the markets
where it does business,
strengthening
its
reputation as a responsible
corporate citizen and in the
process creating business
opportunities for it by
changing the behavior in
To shift these areas towards usage
the focus of mobile phones.
away
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 15
Survey results:
Till the age of 40 we discard phones just within 1-2 years
The growth in the Indian mobile handset market is also likely to be driven by the replacement handset
market rather than new user additions. There is a huge replacement market in India and above all, the
consumers are now very receptive towards newer brands. The replacement market is expected to
grow from 118 mn handsets for the 12-month period ended December 31, 2010, constituting 62.77%
of overall Indian mobile handset market, to 359 mn handsets for the 12-month period ended
December 31, 2014 constituting 89.30% of the overall Indian mobile handset market.
For the basic user durability, battery life, warranty and user friendliness sound quality
was very important and other high end technologies didnt mattered.
Most of these persons were either daily wage earners or the people above 60. An
interesting thing to note was that 3 out of 6 persons gave importance to camera as well.
3
Mobile with a camera is on the way to become a basic feature.
SPEC
TRU Spectrum is a fundamental
driver of cost in mobile
M
networks the fewer
POLI spectrums, the more sites
CY
are needed, and the cost
of
deployment
rises
accordingly. This scarcity
Spectrum situation in 2G (GSM) is
policy islikely to be replicated in
the most3G. It causes Indian
obvious. operators to have to invest
capital
building
India ismore
burdened capacity in urban areas in
order
to
overcome
with
severe spectrum constraints and
spectrum preserve service quality,
constraint but thereby limiting capital
s.
available for the expansion
Minutes of coverage into rural
per
areas or to lower income
subscribe urban agglomerations. The
r
arecivilian spectrum shortage
higher inis created by two factors:
India
the occupation of critical
than
infrequencies by the military
almost and other government
any otherdepartments; and a policy
country bias towards a large
and citiesnumber of operators. Many
in Indiacommentators argue that
have
fewer operators would
some ofachieve greater economies
the mostof
scale,
while
still
densely preserving the benefits of
populate
vigorous competition. All
d areas.
over the world and across
Both
industries, it is amply
these
demonstrated
that
a
factors
market
structure
with
increase
relatively few players but
the need
robust regulatory oversight
for
can be more competitive
spectrum
than one populated by a
,
yet
large number of small
Indian
operators players. In fact market
fragmentation has the
is
struggling disadvantage of none of
the players having enough
with
average capacity and resources for
spectrum innovation and delivering
allocation greater value to the
s only acustomer. There is also the
third
ofdanger of a single large
firm emerging as a virtual
those
available monopoly in such markets,
and
ntly being denied access
drawing to
telecommunications
monopoly services. They are losing
rents.
out because licensees are
The
diverting investments to
governm maintain quality of service
ent wouldin
urban
areas.
A
have tocomprehensive review of
weigh
the overall national benefit
these
of current policy on
factors spectrum allocation is
against urgently
required. Are
its
there
more
efficient
apparent alternatives for the military
objective and public sector which
s
ofwould free spectrum for
maximisi private use while not
ng
adversely affecting the
resource militarys ability to protect
s.
AIndias national interests?
governm This should include an
ent
estimate of the cost to the
initiative nation of the spectrum that
whereby is currently being used by
additional the
military.
Greater
spectrum transparency in this regard
is madewould be most desirable.
available The most serious problem
to
thefacing India surrounds
industry data
services.
Indias
has yet tocurrent
position,
by
deliver international standards, is
results. lagging, and we cannot
afford any complacency.
As
aThe rest of the world is
conseque increasingly
concerned
nce, theabout increasing access to
Indian
high speed data rather
telecomm than voice connectivity.
unication High-speed data services
s industryand the internet are seen
is beingas a critical capability that
starved will drive future global
of
competitiveness
in
spectrum technology and services.
and theFor India, and the rest of
private the developing world, data
sector isservices will be delivered
being
by wireless broadband
drained access rather than fixed
of capital.line
copper
or
fibre
The
networks. But the vision in
losers
India is likely to be limited
from thisby the reality of insufficient
spectrum spectrum availability. The
constraint first 3G spectrum auction
are
thescheduled for January
people 2009 is to be welcomed
who arebut
the
incremental
conseque capacity for each operator
is mostdeficiencies
of
2G
likely tospectrum allocations. The
be
delivery of world-class
consume data services requires very
d
bylarge blocks of spectrum.
voice
capacity A major strategic plan for
as
adata services is urgently
result ofrequired to plan the
availability of sufficient
the
spectrum.
Commerce,
Delhi School of
Economics
MIB,
Page
Department of | 17
model
will
eventually
deliver universal access to
OVER telecommunications and
ALL most importantly access to
INVE high-quality data services.
India needs to set out a
STIN stable policy framework to
G
attract
long-term
in
ENVI investment
telecommunications.
That
RON
requires a stable licensing
MEN structure, consistent policy
T
decisions
and
a
predictable framework for
regulatory
intervention.
India hasThe history of Indian
has
chosen atelecommunications
been
one
of
frequent
shifts
policy of
creating in policies, regulations and
that
create
a highlytaxation
competiti uncertainty for investors. A
stable and attractive policy
ve,
fragment approach is especially
important in the context of
ed
industry, the current global credit
crunch and with capital so
which
scarce.
Policies
are
has
delivered needed which will attract
extraordi long-term investors who
narily lowwill make the commitments
and investments required
prices
create
world-class
and highto
minutes telecommunications
of
usenetworks and services that
will
deliver
global
per
competitiveness
for
all
the
subscribe
citizens of India. Therefore
r.
However, this is the time for the
to
be
these lowgovernment
assessing
fundamental
prices
are onlypolicy issues that impact
currently sector investment, such as
enjoyed foreign direct investment
by aboutcaps, licence extension
spectrum
2530% terms,
of
theavailability and allocations,
and criteria for mergers
Indian
populatio and acquisitions. All these
affect
the
n theissues
rest
doeconomics of additional
not havecapital investment. There
a mobileis a need to determine
phone. what sort of industry India
The realneeds and set the policy
question framework accordingly.
is
to
whether The physical infrastructure
the same(or lack thereof) is widely
MIB,
Department of
Commerce,
Delhi ol of
Scho Economics
Page
| 19
LE
wonder, then, that
PHO Little
operators are shifting their
NE
strategies.
Having
focused on
(HO previously
trying to attract as many
W
customers and sell as
SIM cards as
THEY many
possible, they are now
MAK looking for ways to get
each customer to spend
E
more, by promoting new
MON value added services.
in the rich
EY ?) (Operators
world have been struggling
consume screensaver.
To
rs dailyaccommodate variations in
routine. the popularity of local
Instead deities, the operators have
of wakingcustomised their services
up in thefor different regions. There
morning are more Krishna followers
to
ain Gujarat (West India),
jarring
whereas Kolkata (East
beep
India)
is
known
for
from hisworshipping Durga.
alarm
clock, his
Other devotional services
cell
can help with decisionphone
Instead
of
can singmaking.
referring
to
a
physical
a
melodiou calendar, subscribers can
s
aartireceive automatic alerts to
(prayer) tell them which dates or
times
of
day
are
that
inauspicious
for
starting
a
stimulate
new
job
or
shopping
for
a
s
his
senses atcar. And the caller tune,
is
played
to
dawn. Towhich
incoming
callers
as
they
experienc
e
thiswait for the person they
are calling to answer, has
divine
start
tograduated from being a
his day,bland beeping noise to a
he paysbhajan (devotional song).
Bharti Airtel, one of Indias
30
rupees leading operators, has
($0.63) aintroduced a service which
month. streams live audio aartis
Dependin recited by bhatjis (priests)
g
uponto mobile phones from the
most important shrines.
his
religion, While the bhatji is intoning
he
canthose prayers, he is also
subscribe talking into a microphone
to dailyplaced near the idol. With
quotes the introduction of 3G
from hisspectrum, the possibility of
video streaming is not far
God
which areoff. Given the devotion of
fed
toIndian consumers to their
him, likemobile phones, all this
medicine, gives the notion of an
omnipresent God a whole
three
times anew meaning.
day
at
regular
intervals. MOBILE
For this
service PHONES AND
he
canECONOMICS
either
GROWTH
pay
seven
rupees Case 1: Catch
for
a
weekly the FISH
pack, or
28
rupees You are a fisherman off the
coast of northern Kerala.
for
a
Visiting your usual fishing
monthl ground, you bring in an
y pack,unusually good catch of
which
sardines.
That
means
includes other fishermen in the area
a
freewill probably have done
MIB,
Department of Economics
Commerce,
Page
Delhi School of | 20
Case
2:
Building a simple app can
Smar be affordable for most
tphon companies. Although a
developer might charge
e
$6,000 to $8,000 to create
Apps a typical app, a modest
with fewer features
Fuel app
could cost a company less
Busin than $2,000, a developer
San Diego. The web site
ess in
iPhoneAppQuotes.com
allows users to compare
Between lowest rate quotes from
documen developers.
ting
expenses Here are three ways an
and
app can improve your
processin business:
g credit
cards
from justAttract new
customers
about
anywhere
,
companies
are
smartpho Some
using smartphone apps to
ne
applicatio advertise or expose their
ns haveservice to a new and
changed growing audience. David
custo
mer
servic Even if another firm profits
from
offering
your
e
company's app, users still
benefit from being able to
access your company's
Many
apps doservice with greater ease.
Just ask Tobi Lutke, the
more
CEO of Ottawa-based web
than
site host Shopify. When an
draw
developer
attention independent
to
yourcreated Shopkeeper, an
product; app that allows any of
Shopify's 5,000 customers
they
manage
their
improve to
the
inventories, more than 100
customer' users downloaded the
s
$4.99 app. Lutke says
experienc Shopkeeper and apps like
e. Jasonit are good for his
Gossard, customers
and
his
the leadbusiness. "The app allows
administr small
companies
to
ator foroperate more like larger ethe Circlecommerce shops, which
School, ahave dedicated staff to
parent- improve their workflow,"
owned Lutke says. "With this
and
technology, you can be
operated very small and have the
school insame technology as a big
San
corporation."
Antonio,
praises
the utilityCreate a revenue
of
theopportunity
school's
new free
Some
apps
present
app,
which iscompanies with new ways
schedule to lift profits, and others
d
toare revenue generators
launch inthemselves. Blakely Long,
a couplethe CEO of BetterQOL, a
weeks. pain-management service
Administr in Bellaire, Texas, and her
ators willpartner Brian Loftus, a
be ableneurologist, are banking
to
usethat some of the estimated
their
33
million
migraine
smartpho sufferers will purchase
nes
totheir new app, iHeadache.
highlight The app, which costs
upcoming $9.99
to
download,
school identifies the type of
events headache a user has,
and
based on their symptoms,
make
the duration of their
speedy headache
and
the
updates, medication they may be
he says.taking. The app also
And
generates reports which
parents can
be shared
with
will
be
physicians.
"We
are
able
to
targeting neurologists and
Case
3:
In India, the government is
up
elaborate
Mobil setting
technology and regulatory
es for architecture to deliver
fighti basic banking services
through
mobile-linked
ng
accounts in rural areas.
pover Around 73,200 villages
with a population of over
ty
2,000 people have been
identified
to
receive
Given themobile-linked basic bank
high
services by March 2012.
penetrati
on
of
mobile The idea is to marry the
telephony countrys 500-million-plus
mobile phone network and
in
developin basic financial services
which are often not
g
available in rural areas that
countries
have no bank branches.
like India,
The National Payment
using it toCorporation of India, a notdeliver for-profit company that
scarce provides
low-cost
banking infrastructure for providing
services payment services among
in
ruralbanks, is helping formulate
areas isback-end
technology
one waysolutions. These will link
of
the
persons
mobile
fulfilling number to his no-frills bank
the
account. Eventually, it will
governm be integrated with the
ents
unique identity number,
financial once
it
gets
inclusion operationalised.
program
me Doing
banking How will this work? One
work viamodel, successfully tried
out in some developing
the
countries, like Kenya, is
mobile isthe banking correspondent
convenie (BC) network. The bank
nt not justappoints a BC in a village,
for hot-say the kirana shop-owner,
and villagers give her their
shot
deposits.
MIB,
Economics
Department of
Page
Commerce,
| 23
Delhi School of
The BC
services
them in
one of
two
ways:
1
She
anks server -- if
the customer has
a mobile phone,
he gets an SMS
receipt; if not, the
BC prints out a
receipt (such a
printer-phone setup, which includes
a
scanner
for
fingerprints, costs
around `30,000).
h
a
s
2
The
BC
a
keeps
the
money,
p
and
the
bank
h
which
has
a
o
deposit from the
BC debits it from
n
that. When the
e
money
is
o
withdrawn,
n
another wireless
w
sync gets done,
another
h
SMS/receipt gets
ic
generated,
and
h
this time around
t
the BCs deposit
h
account with the
bank
gets
e
credited.
a
m
o There are some doubts as
u to whether, when the
n mechanics of this are
t worked out, this will be
is profitable for banks or the
e BC as the volume of
n money in the hands of
those it should most
t
benefit is small. One
e suggestion to increase
r volumes is to use the
e mobile telephony route for
d NREGS
payments.
a NREGS payments for
n 2010-11 are expected to
d be in the region of `60,000
is crore. The idea is that the
w unique ID each citizen will
ir get will be linked to the BC
e network. Not only will the
l government be able to
e ensure that the money
the
person
s goes to
concerned,
with
zero
sl
leakage -- a major concern
y
at present -- but it also
s means that the NREGS
e worker gets to know he
n has received his money
t without wasting the day or
t two it takes to visit the
o nearest bank branch to
t check
whether
the
h payment is in. The same
e holds for all other social
payments
the
b sector
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 24
is the
now?
Perhaps,
Beha Why
economists have finally
viour realized that orthodox
economic models are too
al
unrealistic and dogmatic.
EconoAnd perhaps it is the result
mics of our constant search for
directions in research.
Rev new
One might also ask why
olutio other ideas (such as those
n? of bounded rationality) are
by
thecompare too many products
standard and features leading to
rational confusion, random choice,
or even failure to make any
man
choice.
paradigm
.
ToHeuristics
consumers
often
take
short
support
the case,cuts (e.g., by following rules
reference of thumb such as what
s
areothers say/do) when the
brought decision environment is
from
complex relative to their
research mental and computational
in
apabilities.
psycholo
gy
andEndowment
the
preference
for
have
avoiding loss is widely
future- considered to be greater
bias.
than the preference for
Issues gain. Part of the reluctance
to switch from one supplier
the
perspecti to another may be due to
ve
ofthe fear that experience with
new supplier is unknown
behaviou a
and may be worse.
ral
economic
s explore,
include: Behavioural
economics and
Choice behavioural
overlo bias
ad
experim
ental
researc
h on
decision
-making
behaviour, behavioural
economists have sought to
better explain what
influences consumers in
their purchasing
MIB,
Economics
Department of
Page
Commerce,
| 25
Delhi School of
deci
sion
s
and
how
this
beh
avio
ur
affe
cts
the
mar
ket
(Dell
a
Vign
a
200
9).
In
ess
enc
e,
beh
avio
ural
eco
nom
ics
use
s
evid
enc
e of
how
hum
ans
actu
ally
beh
ave
(Syl
van
200
9). It
argu
es
that
obs
erve
d
hum
an
deci
sion
mak
ing
diffe
rs
from
the
rati
onal
welf
are
max
imizi
ng
behaviour
assumed in neoclassical
economic
models. For example,
people:
1
stick with
what they know
2
follow
others
3
settle for
something that is
good
enough,
rather
than
searching for the
best (optimal)
4
procrastin
ate, putting off
things such as
saving
for
retirement
or
switching
5
stick with
the default option,
even if it is not the
best
6
may delay
making a decision
if
it
is
complex/confusing
or
avoid
it
altogether
7
are readily
confused,
and
prone
to
misleading advice
8
are much
more
concerned
about
possible
losses
than
possible
equivalent gains
9
are
inclined to stick
with the status quo
10
dislike
uncertainty
11
value
fairness
and
care
about
others,
rewarding or
punishing
behaviour
sometimes to
their
own
cost
12
sh
arply
discount
the future
compared
to
the
present
they care
more about
immediate
benefits
and costs
than those
in
the
future
often
make
decisions
tend
relying
on
t
simple
heuristics or
o
rules of thumb
b
rather
than
e
considered
calculation.
o
v A basic premise of
e behavioural economics is
r predictable
c irrationality. Marketing
o and advertising staff
employed by businesses
n already have and rely on
fi thorough knowledge of
d such behavioural
e characteristics to increase
n sales and boost profits.
t
aA
complement to
n conventional
d
analysis,
not
a
s
o substitute. One thing
mshould be stated clearly at
e the outset. Behavioural
ti economics is a complement
conventional
neomto
classical
economics
in
e
assist
s endeavouring to
marketing
mimproved
is decision / understanding
j buying patterns, not a
u replacement. Behavioural
d economists generally agree
g that markets are best
e understood by building up
h from the behaviour of
agents.
But
o individual
economics
w behavioural
d argues that behavioural
is bias is systematic and
ci predictable so that they can
be taken into account to
p
generate better analysis
li
and policies.
n
e
d
t
h Behavioural
e economics and
y Consumers
w
ill We have utilised the
b framework of behavioural
to
explore
e economics
actual
consumer
i
n behaviour and consumer
behavioural
tendencies
t that appear particularly
h relevant to the Mobile
e market in India. The
f behavioural
economics
u framework will be used to
t assist in explaining why
u some consumers may be
r making or not making
e decisions - e.g., to buy a
. phone , prefer a phone
over another. The key
13
14
behaviou
ral
economi
cs
insights
include:
Too
Much
Choice
`16,500
or Choice overload
while
Conventional
theory
those onthe upperargues that more choice is
half werebetter. However, this claim
willing toignores the costs of making
pay
choices.
In
affluent
`23,500 countries,
consumers
on
become
average. caneasily
overwhelmed
with
choices,
Again,
making it difficult for them to
these
at
a
decision.
choices arrive
consumers
having
too
many
seem like
products,
features
or
mere
laborator contract plans to compare.
y games.This can lead to confusion,
However, random choice, or even
there arefailure to make any choice.
very
When decision-making is
serious complex the consumer can
economic make the wrong choice, and
decisions
market
and
that cancertainly
technological
developments
also be
influence in mobile phones are
d
byincreasing the complexity
consumers face. Moreover,
minor
variations there are allegations that
in
thesuppliers
might
be
way thedeliberately increasing the
choice iscomplexity of consumer
framed. choice (sometimes referred
to as confusopoly) and,
indeed,
using
other
behavioural insights their
marketing/advertising staff
have long had about
consumer
behavioural
bias to their advantage. A
contribution of behavioural
economics in this regard is
the warning it sounds that it
is not necessarily more
information
but
better
(perhaps
even
less)
information that is required
to be presented/framed in a
structured
easily
comprehensible format. The
success of IPhone is a
perfect example of a
success of a phone with
limited features or the
features which are required.
Heuristics
lead
toconsumers take short-cuts
wrong/su to decision-making, the
b-optimal information provided must
decisions. recognise this and be easily
This
and
quickly
decisionfactor isrelevant.
For
instance,
relevant qualifications
and
to
theenvironmental
standards,
design ofespecially presented in fine
industry print are unlikely to impact
codes oron decisions.
regulation
mandated
informatio Endowment
consumers
may
be
reluctant
n
disclosure to give up what they have.
, includingThey may stay with the
informatio present service provider
e.g.,
the
incumbent,
n
because
of
misplaced
disclosed
loyalty,
a
failure
to
through
acknowledge poor choices
performan
in the past, or an irrational
ce
consideration of sunk costs.
indicator Barriers to switching to a
metrics. Ifnew
MIB,
Economics
Department of
Page
Commerce,
| 27
Delhi School of
nt factor
which
Hyperbolic
makes it
all
thediscounting
consumers, and service
more
important providers too, tend to be
to ensureshort-sighted when making
that
switching decisions where immediate
is hasslecosts or benefits need to be
free, fastweighed against future costs
and
or benefits. For example,
cheap.
consumers may buy a
phone
looking
at
the
Defaul immediate offer of getting
ts aspecially
merchandised
default
Mobile phones in the name
inertia
of cricket teams (IPL Teams)
may
or F1 race teams because
operate they place more value on
since
the immediate benefits of
making athe offer, such as a heavily
decision loaded and exclusivity of the
to
opt-new handset, rather than on
out maythe long-term costs of being
take morehaving to use the costly
effort
phone and unable to switch
than
toto
access
lower-priced
opt-in alternatives and the latest
e.g.
antechnology.
In
short,
opt-in consumers tend to discount
default
costs that impact in the
would
longer term more heavily
automatic than benefits that impact in
ally
the short term. Service
extend aproviders/Manufactures, too,
mobile
may tend to apply the same
phone orhyperbolic
discounting
broadban (short-sightedness) so that
d contractthey attempt to maximise
unless theshort-term
revenue/profit
customer from
subscribers/buyers
expressly through pricing tactics that
opts-out. e.g., lead to bill shock,
(The
rather than focus on the
issue
islonger term benefits of
whether retaining
a
satisfied
the
customer. It may also lead
default
them to minimise costs of
should becustomer
service
and
an optcomplaints-handling.
out
unless the
customer
actively
optsin?)
Also,
consumer
s
may
tend
to
take
a
path
of
g biases consumer
Framin
Commerce,
Delhi School of
Economics
MIB,
Page
Department of | 28
Figure 7: Normative
Policy Model
Risk/Loss aversion
the
preference for
avoiding loss is widely
considered to be greater
than the preference for
gain. Part of the reluctance
to switch from one supplier
to another may be due to
the fear that experience with
a new supplier is unknown
and may be worse. Risk
aversion may also be
influencing consumers to
overestimate the (shortterm) costs of switching, and
underestimate the longer
term benefits of switching.
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 29
APPE
NDIX
B:
BEHA
VIOR
AL
ECON
OMIC 2
S
SURV
EY
QUES
TION
S
1
P
l
e
a
s
e
t
e
ll
u
s
t
h
e
l
a
s
t
t
w
o
d
i
g
it
s
o
f
y
o
u
r
d
ri
v
i
n
g
li
c
e
n
s
e number. If
you
do
not
have D/L, tell
us last two
digits of your
passport.
If
you don't have
that as well,
tell us the last
two digits of
bank account
number.
According to
our recent
market
research our
group found
out that there
is a
revolutionary
phone which
is getting
launched.
With all the
features
below beside
being a super
cool phone.
1. Face
Recognition
2. Voice
Assisted GPS
with
advanced
navigation
using MQRS
technology.
3. 3D
Video
Recording,
3D
video
playback and
gaming
without
glasses.
4. Universal Inbuilt remote
to handle all
devices
in
your home.
5. Lots
of
Hitech
features like
WiDi over WiFi.
Will you be
willing to buy
such a phone
at cost of say
the number in
question one
multiplied by
1000 rupees.
( If the number
is
pay 23k for
2
this phone)
3 2(a) Yes
,
w 2(b) No
ill 3 What is the
y
maximu
o
m money
u
that you
b
can shell
e
out for
w
this
ill
phone.
in
( In
g
thousand
t
s of
o
rupees.)
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 31
APP
END
IX C:
FEE
DBA
CK
ABO
UT
PRE
SEN
TATI
ON
Date:
nd
-2
Sept
emb
er
2011
Prese
nted
by :
Group
10
Group Positives
Numbe
r
1) well researched
2) some interesting stuf
3) PowerPoint design was crisp
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 32
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 33
11
1
) Good efort
2
) Informative
3
) Explanation was simple and crisp
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 34
Cherie Blair
Foundation for
Ariel
Rubinste
in:
Colin F. Camerer,
Manjari Juneja:
http://www.expresscomputeronline.com.
Available online at
http://www.expresscomputeronline.com/20110515/coverstory01.shtml.
P.Antoine (2010):
Vodafone:
&
Telecommunicatio
Xavier,
ns Policy. In A. &.
Patrick
(2010): Henten A. Elgar
June Gentzoglanis
Regulation
Behav (Ed.):
and
the
Evolution
ioural of the Global
Econo Telecommunicatio
mics ns Industry.
MIB,
Department of
Commerce,
Delhi School of
Economics
Page
| 37