Estimating demand for cellular phone service under nonlinear pricing |
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Authors: | Ching-I Huang |
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Institution: | (1) Department of Economics, National Taiwan University, 21 Syu-Jhou Road, Taipei City, 10055, Taiwan |
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Abstract: | Cellular phone carriers typically offer complicated nonlinear tariffs. Consumers make a discrete choice among several rate
plans. Each plan has a nonlinear price schedule, and price is usually lower for in-network calls. I present an empirical framework
to estimate demand under such nonlinear pricing schemes by using parsimonious carrier-level data and apply the estimation
method to analyze the market in Taiwan. I evaluate the impacts of termination-based pricing schemes on the market structure
by counterfactual simulations. There is no evidence showing that the network effect resulting from termination-based pricing
has significant effects on market structure.
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Keywords: | Termination-based price discrimination Optional rate plans Cellular phone service Structural estimation Three-part tariffs |
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