Question
through M-PESA. In financial year 2016, M-PESA had 100,744 agents, 16.6 million 30-day active users, each of whom carried out an average of 7.43 chargeable
through M-PESA. In financial year 2016, M-PESA had 100,744 agents, 16.6 million 30-day active users, each of whom carried out an average of 7.43 chargeable transactions, totaling 5.29 trillion Kenya shillings a year. Safaricom's revenue was 177.8 billion Kenya shillings, of which the top three services were voice, M-PESA, and mobile data. M-PESA contributed 41.5 billion or 23%. By comparison, in 2013, total revenue was 118.1 billion Kenya shillings, of which M-PESA contributed 21.84 billion or 18.5%. Required: (a) What economic inefficiencies does M-PESA resolve and how? (b) Explain how M-PESA exploits the concepts of price elasticity and income elasticity of demand. (c) How can Safaricom exploit economies of scale and/or scope to provide voice, data, and M-PESA services? (d) Using a suitable figure, draw a hypothetical demand and marginal cost for M-PESA services. How do the following affect the demand and profit- maximizing price? (i) Network effects; (ii) Competition from Equity Bank's Finserv service. (e) Unlike bank deposits, M-PESA e-floats are not guaranteed by the government. f) Using the concept of a strategic move, explain how the trust resolves
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