Abstract
This paper analyzes telecommunications demand by firms, focusing on communication flows among production units. We consider first the case of two business unit that can play simultaneously or in a leader/follower situation regarding their communication decisions. In this context, we define the network effect as the advantage a production unit obtains by using an input whose costs are shared by another user. The model is then generalized, taking into account indirect links among production units. The theoretical framework we suggest explains business telecommunications usage by multi-unit firms, and sheds light on the relationship between firms' internal organisation and communication flows.
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