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Quantifying the Benefits of Entry into Local Phone Service

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Author Info

  • Nicholas Economides

    ()
    (Stern School of Business, NYU)

  • V. Brian Viard

    ()
    (Graduate School of Business, Stanford University)

  • Katja Seim

    ()
    (University of Pennsylvania)

Abstract

Local telecommunications competition was an important goal of the 1996 Telecommunications Act. We evaluate the consumer welfare effects of entry into residential local telephone service in New York State using household-level data from September 1999 to March 2003. We address the prevalence of nonlinear tariffs by developing a discrete/continuous demand model that allows for service bundling and unobservable provider quality. We find that the average subscriber to the entrants' services gains a monthly equivalent of $2.33, or 6.2% of her bill, in welfare from competition. These gains accrue primarily from firm differentiation and new plan introductions rather than from price effects.

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File URL: http://www.stern.nyu.edu/networks/Local_Telecommunications.pdf
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Bibliographic Info

Paper provided by NET Institute in its series Working Papers with number 07-48.

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Length: 49 pages
Date of creation: Dec 2007
Date of revision: Dec 2007
Handle: RePEc:net:wpaper:0748

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Web page: http://www.NETinst.org/

Related research

Keywords: Entry; Nonlinear Pricing; Telecommunications; Discrete/Continuous Demand;

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References

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  6. Stefano DellaVigna & Ulrike Malmendier, 2006. "Paying Not to Go to the Gym," American Economic Review, American Economic Association, vol. 96(3), pages 694-719, June.
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Cited by:
  1. Jonathan D. Ketcham & Claudio Lucarelli & Eugenio J. Miravete & M. Christopher Roebuck, 2012. "Sinking, Swimming, or Learning to Swim in Medicare Part D," American Economic Review, American Economic Association, vol. 102(6), pages 2639-73, October.
  2. Pérez Montes, Carlos, 2013. "Regulatory bias in the price structure of local telephone service," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 462-476.
  3. Ching-I Huang, 2008. "Estimating demand for cellular phone service under nonlinear pricing," Quantitative Marketing and Economics, Springer, vol. 6(4), pages 371-413, December.
  4. Ching-I Huang, 2013. "Intra-household effects on demand for telephone service: Empirical evidence," Quantitative Marketing and Economics, Springer, vol. 11(2), pages 231-261, June.
  5. Anja Lambrecht & Katja Seim & Naufel Vilcassim & Amar Cheema & Yuxin Chen & Gregory Crawford & Kartik Hosanagar & Raghuram Iyengar & Oded Koenigsberg & Robin Lee & Eugenio Miravete & Ozge Sahin, 2012. "Price discrimination in service industries," Marketing Letters, Springer, vol. 23(2), pages 423-438, June.
  6. Miravete, Eugenio J, 2007. "Competing with Menus of Tariff Options," CEPR Discussion Papers 6279, C.E.P.R. Discussion Papers.
  7. Jiyoung Kim, 2006. "A Structural Analysis for Consumer's Dynamic Switching Decision in the Cellular Service Industry," Working Papers 06-24, NET Institute, revised Oct 2006.
  8. Ingo Vogelsang, 2014. "Will the U.S. and EU Telecommunications Policies Converge? A Survey," CESifo Working Paper Series 4843, CESifo Group Munich.
  9. Jean-Pierre Dubé & K. Sudhir & Andrew Ching & Gregory Crawford & Michaela Draganska & Jeremy Fox & Wesley Hartmann & Günter Hitsch & V. Viard & Miguel Villas-Boas & Naufel Vilcassim, 2005. "Recent Advances in Structural Econometric Modeling: Dynamics, Product Positioning and Entry," Marketing Letters, Springer, vol. 16(3), pages 209-224, December.
  10. Ingo Vogelsang, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, Lucius & Lucius, vol. 64(3), pages 193-269.

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