Discrete Choice Analysis of Demand for Broadband in Japan

The remarkable development of Japan’s broadband (BB) market has attracted attention worldwide. This paper is one of the first to analyze Japan’s BB demand (including FTTH) using a discrete choice model. Our main conclusions are first, there is a distinction between narrowband (NB) and BB services based on a nested choice structure. Second, considering own-price elasticities of access demand, ADSL is inelastic, but FTTH and CATV are elastic. Third, in ADSL submarkets, low-speed and high-speed ADSL are becoming more elastic.     

Income and price elasticities of electricity demand in Australia: Evidence of state‐specific heterogeneity

This paper estimates country‐wide and state‐level income and price elasticities of electricity demand in Australia for the period 1999Q1–2013Q2 using the National Electricity Market data and the autoregressive‐distributed lag model. The results suggest that the long‐run income and price elasticities are inelastic and are statistically significant with theoretically consistent signs. The country‐wide income and price elasticities are estimated to be 0.41 and ?0.38, respectively. It is also found that there exists state‐specific heterogeneity in both speed and magnitude of the electricity consumption adjustment in response to changes in income and electricity price. These results have important policy implications, including the need to use state‐specific elasticities in the scenario analysis of the energy pricing policy.     

A forward-looking analysis of residential telephone access demand in Korea

This paper analyzes the price elasticity for residential access demand in Korea using survey data of 1998. We apply an asymmetric GEV model to this data and derive a formula for forward-looking price elasticities of the penetration rate. We categorize the respondents into two groups, single-line households and multi-line households, and estimate the price elasticities for each group. Estimation outcome shows that single-line households are less sensitive to price changes than multi-line households with respect to installation charge and rental charge. In view of the relatively low price elasticities of single-line households, an increase in rental charge is not expected to result in large-scale drop-offs of primary lines.     

Food security in Kenya: Insights from a household food demand model

This paper evaluates the household food security situation in Kenya in terms of access to food. We apply a quadratic almost ideal demand system (QUAIDS) model to nationally representative household survey data from Kenya, and estimate and interpret price and expenditure elasticities as indicators of household sensitivity to market shocks. Our estimation results show positive expenditure elasticities, close to unity, while all compensated and uncompensated own-price elasticities are negative and smaller in magnitude. A complementary welfare analysis shows high compensated variations in the long run, ranging between 34% and 131% across food groups. This suggests that rising relative food costs have led to deterioration of the food security situation in Kenya, and the most severely affected households seem to be those that rely on informal markets and reside in rural areas. To improve food security, targeted income support could be a more effective policy than price support, given the much higher estimated expenditure elasticities.     

The demand for residential electricity: new evidence on time-varying elasticities

This study employs a generalized functional form to examine demand for residential electiricity. The appropriatenes of the conventional double-log and linear forms are tested. Time-varying elasicities are estimated. Major findings are summarized as follows:(1) the double-log and linear forms can be rejected at the 0.05 and 0.01 levels, respectively; (2) long-run own-price elasticities declined in absolute value consistently from 2.13 to 1.19 during the period 1950–87; (3) long-run income elasticities also decreased from 1.29 to 0.97 during the same period; and (4) long-run corss-Price elasticities with respect to the price of natural gas dropped form 0.40 to 0.29. These results may be heplful to decision makers in determining the change in total revenues owning to the change in prices, pricing strategies, the effectiveness of energy conservation programmes, the effect of rising real income on the demand for residential electricity and future demand.     

Interstate switched access demand analysis

The breakup of the Bell System in 1984 led to the adoption by the Federal Communications Commission of a system of tariff charges that are paid to local exchange carriers by business and residential telephone subscribers, and interexchange carriers such as AT&T. These charges are designed to recover the costs associated with providing access to the public switched network to complete interstate calls. This system is known as the FCC Access Charge Plan. Flat-rate fees, named Subscriber Line Charges, are imposed on telephone subscribers, while usage-based charges are billed to interexchange carriers. These are called Carrier Common Line and Traffic Sensitive rates. Since CCL and TS rates are based on network usage, forecasts of switched access demand are required to set them properly.This paper presents an econometric model of interstate switched access demand developed and utilized by AT&T to produce forecasts of 1988 demand in connection with the Annual 1988 Access Tariff Filings. The model is estimated in a state-level pooled cross-sectional time-series framework, with dynamics introduced via polynomial distributed lags on price and income. It represents an extension of the econometric demand model developed and used by the FCC a year earlier to determine a reasonable forecast of 1987 Carrier Common Line switched access demand. Estimated demand elasticities and forecasts are provided. The model forecasts are also compared to those from other models.     

The competitive nature of the nursing home industry: price mark ups and demand elasticities

Nursing home markets are likely to deviate from a competitive structure because of limitations on entry imposed by Certificate of Need (CON) regulations and the potential for product differentiation along such attributes as location, religious affiliation and quality. This paper investigates the structure of nursing home markets in New York State by calculating price mark ups and residual private pay demand elasticities. It shows that the residual demand elasticity is bound by estimates based on price mark ups above marginal costs and above Medicaid rates. This approach allows estimation of demand elasticities in all markets, whether or not CON regulations constrain bed supply. Mean price elasticities (in absolute value) calculated for nursing homes in New York State in 1991 ranged from 3.46 to 3.85.     

High-speed Internet access and housing values

A hedonic model is estimated that relates house values to high-speed Internet access while controlling for the potential endogeneity of Internet access. Results show that single-family homes with access to a 25 Mbps broadband connection have a price that is about $5,977, or 3%, more than similar homes in neighborhoods with 1 Mbps. The rural premium is lower at $5,099. A cost-benefit exercise on the viability of rural broadband shows that demand will generally not support private investment, but that the revenue gap from upgrading legacy networks could be readily covered by the Universal Service Fund and other public subsidies.     

Town size and the consumer behaviour of Spanish households: a panel data approach

The aim of this paper is to analyse the effect of town size on the Spanish demand for food. The methodological approach followed in the study is to use panel data built from the Spanish Quarterly National Expenditure Survey to estimate a demand system. The use of this type of data allows control for unobserved time invariant heterogeneity as well as to take into account the time and the cross-section dimension of data. Four locations are distinguished: (1) less than 10000 inhabitants; (2) between 10000 and 100000 inhabitants; (3) between 100000 and 500000 inhabitants; and (4) more than 500000 inhabitants. Eight broad food categories are considered: (1) cereals and potatoes; (2) meat; (3) fish; (4) dairy products; (5) fats and oils; (6) fruits; (7) vegetables; and (8) other food. Income and price elasticities are calculated for each location. In general terms, two general conclusions can be drawn. First, results indicate that only slight changes in tastes have taken place during the analysed period; second, income and price elasticities use to decrease as town size increases.     

Conditional and unconditional food demand elasticities in a dynamic multistage demand system

This paper estimates conditional and unconditional demand elasticities in a three stage analysis of consumer demand for food and non-food items in Greece. A dynamic version of the AIDS model is specified and estimated, and full system misspecification tests applied. Correction formulas for price and expenditure elasticities are used to calculate unconditional elasticities from conditional demand sub-systems. All food items rank as price inelastic. Deviations between the calculated conditional and unconditional price and expenditure elasticities are found to be significant, demonstrating the importance of correcting conditional elasticities before they can be used for policy purposes or welfare analyses.     

Estimation of the effects of price on apartment water demand using cointegration and error correction techniques

Water price is a key instrument in regulating water demand in the residential sector. Many empirical studies have assessed the effects of price through quantifying the price elasticity of water demand. However, most of these studies have mainly focused on the single-family housing rather the multifamily housing. An in-depth understanding of the price elasticity of multifamily housing water demand is paramount for water planners in order to properly manage water use in the fast growing intensive housing developments in urban areas. This study investigates both the long-term and short-term price elasticities of water demand in the residential apartments in Auckland central city. Using 6 years of monthly time series data, the price elasticities were estimated through cointegration and error correction methods. The results showed that the price elasticities of water demand were ?0.14 and ?0.12 in the short term and the long term, respectively. The price is inelastic yet negative and statistically significant, thus it can play a role in demand management.     

Modelling inbound international tourism demand in small Pacific Island countries

ABSTRACT

In this study, we estimate inbound international tourism demand models at the individual source market-destination and overall destination levels for Fiji, Cook Islands, Tonga and Vanuatu from 2002Q1 to 2016Q2 and Samoa from 2002Q4 to 2015Q3. Tourism demand is measured by visitor arrivals, tourism prices, the source country’s real GDP, tourism prices in substitute destinations, seasonality and structural breaks, all of which are considered plausible determinants. The models are estimated using the ARDL-bounds approach, structural breaks are identified using the Bai and Perron break test, and seasonality is tested using the US Census Bureau’s X-13 ARIMA-SEATS methodology. The study is important because it presents new evidence on price, income, and substitute price sensitivity, word of mouth, seasonality, and structural-breaks effects in Pacific island destinations.     

Access prices,unbundling and product variety in European Internet markets

A fundamental policy in European broadband regulation is unbundled access to the local loop of the incumbent telephone company. We present comparative static results that show as the access price decreases, the retail price decreases, the variety of plans offered by Internet service providers increases and the quantity of each variety increases when a threshold condition is met. Using data from 18 European countries from 2006 to 2012, we find empirical support for these results when Internet product variety is measured by variation in download speeds.     

Estimation of an implied price elasticity of demand through current pricing practices

Researchers have long pursued better methods to estimate price elasticity of market-level demand. Due to a plethora of empirical problems, the estimates produced in many empirical studies leave researchers with wide confidence intervals that do little to clarify demand conditions. As a result, these estimates are of limited practical use to the firm facing a firm-level demand. Here, a non-statistical methodology based on seller optimization behaviour is applied that creates an ‘implied elasticity’ of firm-level demand that is robust, intuitively plausible and free of oppressive data requirements. These elasticities are tested in an applied setting against pricing managers’ surveyed estimates for customer price sensitivity for freight rail transportation services and it is found that the estimate is consistent with their pricing behaviour. This methodology is recommended for creating a simple, plausible starting point estimate for firm-level price elasticities, or using this calculation as an input to statistical studies.     

Telephone pricing structures: The effects on universal service

We use 1987 data to study the household demand for access to the telephone system. Previous analyses find demand to be highly inelastic and, therefore, predict that local rate increases will have little impact on the goal of providing universal telephone service. We estimate that price has a considerably stronger effect on access demand, especially at low incomes, and argue that elasticities increased in the 1980s. But our evidence also suggests that the structure of telephone rates matter: where local measured service is available, changes in flat rate prices have no effect on access demand.     

An empirical study of broadband diffusion in rural America

In this study we examine the factors that will encourage broadband adoption in rural areas. Using data on rural Incumbent Local Exchange Carriers (ILECs) we find that low density, high cost markets decrease the ability of the telecommunication service providers to offer DSL, but other factors also play a role. Demand for broadband has become more inelastic over time, marginal increases in speed alone have lost their appeal to customers, and the inclusion of video in a broadband package improves broadband take rates and willingness to pay. Small income elasticities reinforce our finding that broadband has become a necessity. Our analysis shows that price subsidies may not be effective in providing a large boost in demand, but policies that lower the cost of providing video may stimulate broadband adoption indirectly if the savings lead to more affordable bundled communications multimedia packages that users want.     

The role of WiBro: Filling the gaps in mobile broadband technologies

This paper analyzes WiBro, one of the emerging wireless technologies for portable Internet services (PIS), which are designed to enable mobile broadband access. Based on an empirical examination of consumer preferences for mobile broadband technologies and an estimation of the future demand for WiBro, this study proposes that WiBro should fill the gaps between competing mobile broadband technologies, such as 3G and WLAN.     

The effects of price on household demand for food and calories in poor countries: are our databases giving reliable estimates?

Food price policy relies heavily on estimated price elasticities of food demand to help balance the nutritional and economic objectives in poor countries. Economists use either unit values (ratios of household expenditure to quantity purchased) or community prices (enumerated from vendors in local markets) as proxies for market prices when estimating price elasticities with household survey data. Biases are believed to result from using unit values, due to measurement error and quality effects, but evidence on this issue is lacking and even less is known about community prices. This article provides an empirical evidence from Vietnam, which suggests that economists should exercise caution when estimating price elasticities from household surveys. A 14-food demand system is estimated alternatively with unit values or community prices, and the elasticity of calories with respect to rice prices is calculated. This elasticity is more than twice as large (?0.54 versus ?0.22) when community prices are used rather than unit values. Hence, conclusions about the nutritional effects of rice price increases appear sensitive to data choices made by economists. More generally, this discrepancy suggests that the household survey databases commonly used by economists may not provide reliable estimates.     

A variance equality test of the ICAPM on Philippine stocks: post-Asian financial crisis period

Analysis of the data generated from various residential time-of-day electricity pricing projects often involves estimation of a system of demand equations. Both ad hoc demand models and neoclassical demand models have been estimated, often resulting in considerably different estimates of price elasticities. In this paper, elasticity estimates are presented from each type of demand model using data from the Arizona and North Carolina rate demonstration projects. The relationship between the elasticities generated from ad hoc models and separable neoclassical models is explored and the divergent price elasticity estimates are reconciled.