Determinants of subscription time for portable internet service

Abstract

This paper analyses the determinants of the subscription time for portable Internet service (PIS). To this end, a two-equation model, which incorporates a two-level decision structure: a decision on whether to subscribe for the PIS and a decision on the subscription time conditional on deciding to subscribe for it, is proposed. The two-equation model is appropriate for analysing the determinants of the subscription time for PIS.

Notes

In the context of econometric modelling, apart from the way information on

is observed, the two-equation model is very similar to sample selection models (Heckman, 1979) or the type 2 Tobit model (Amemiya, 1985), which are typically employed to correct selectivity bias in applied microeconomic analysis. The only difference is that the main concern is modelling zero responses and not selectivity (Yoo et al., 2001).

To estimate the two-equation model, the starting values were obtained from estimations of univariate models (1) and (2). ρ was started at zero. During the iterations, the estimated coefficients of ρ and σ were achieved by estimating γ = ρσ and δ =  σ (1 −  ρ² )^1/2. The specifications imposed a desirable property such that the standard deviation σ should be strictly positive and the correlation coefficient ρ should range from –1 to 1. After convergence on these transformed parameters, the final output and derivatives were written in terms of ρ and σ.