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Consumer behavior towards on-net/off-net price differentiation

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  • Haucap, Justus
  • Heimeshoff, Ulrich

Abstract

This paper explores how consumers react towards price differentiation between on-net and off-net calls in mobile telecommunications - a pricing policy that is common in many mobile telecommunications markets. Based on a survey of 1044 students it is demonstrated that some consumers may suffer from a "price differentiation bias", i.e., a fair number of consumers may overestimate the savings that result from reduced on-net and/or off-net charges, as they do not appear to weigh the prices with the probabilities of placing off-net and on-net calls. This may help to explain why it have been the smaller operators in various countries who have introduced on-net/off-net price differentiation. The paper also discusses the implications that such a consumer bias may have for market competition.

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Bibliographic Info

Article provided by Elsevier in its journal Telecommunications Policy.

Volume (Year): 35 (2011)
Issue (Month): 4 (May)
Pages: 325-332

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Handle: RePEc:eee:telpol:v:35:y:2011:i:4:p:325-332

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Related research

Keywords: Mobile telecommunications Price discrimination;

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Cited by:
  1. Claussen, Jörg & Trüg, Moritz & Zucchini, Leon, 2011. "Termination-Based Price Discrimination: Tariff-Mediated Network Effects and the Fat-Cat Effect," Discussion Papers in Business Administration 12688, University of Munich, Munich School of Management.
  2. Barth, Anne-Kathrin & Graf, Julia, 2011. "Irrationality rings! - Experimental evidence on mobile tariff choices," DICE Discussion Papers 36, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  3. Haucap, Justus, 2010. "Eingeschränkte Rationalität in der Wettbewerbsökonomie," DICE Ordnungspolitische Perspektiven 08, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Gu, Yiquan & Wenzel, Tobias, 2011. "Transparency, entry, and productivity," DICE Discussion Papers 39, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  5. Muck, Johannes, 2012. "The effect of on-net / off-net differentiation and heterogeneuous consumers on network size in mobile telecommunications : an agent-based aporoach," 23rd European Regional ITS Conference, Vienna 2012 60355, International Telecommunications Society (ITS).
  6. Karaçuka, Mehmet & Çatik, A. Nazif & Haucap, Justus, 2012. "Consumer choice and local network effects in mobile telecommunications in Turkey," DICE Discussion Papers 70, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  7. Christin, Clémence, 2011. "Entry deterrence through cooperative R&D over-investment," DICE Discussion Papers 38, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  8. Stühmeier, Torben & Wenzel, Tobias, 2012. "Regulating advertising in the presence of public service broadcasting," DICE Discussion Papers 41, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  9. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  10. Zucchini, Leon & Claussen, Jörg & Trüg, Moritz, 2013. "Tariff-Mediated Network Effects versus Strategic Discounting: Evidence from German Mobile Telecommunications," Discussion Papers in Business Administration 14848, University of Munich, Munich School of Management.
  11. Zucchini, Leon & Claussen, Jörg & Trüg, Moritz, 2012. "Tariff-Mediated Network Effects versus Strategic Discounting: Evidence from German Mobile Telecommunications," Discussion Papers in Business Administration 13764, University of Munich, Munich School of Management.

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