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Measuring Quality Change due to Technological Externality in Multi-Feature Service Bundles

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Author Info
Gupta, Abhay

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Abstract

Technological innovation, externalities and network effects keep shifting the preference parameters in cellular telecommunication service sector. The paper suggests a framework to model these changes.It notes two channels that affect the service prices (in possibly opposite ways). In each corresponding period, consumer with lower reservation prices are shopping for the services. But these reservation prices are going up due to complementarity/ network effects. Under some reasonable assumptions on industry and cost structure, market data can be used to identify these changes. A price index is suggested that decomposes service bundle price changes into the change in price for same-quality of service and change in quality of the service bundle. Some interesting properties of these indexes are also discussed.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9284.

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Date of creation: Nov 2007
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Handle: RePEc:pra:mprapa:9284

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Find related papers by JEL classification:
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
D62 - Microeconomics - - Welfare Economics - - - Externalities
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
D49 - Microeconomics - - Market Structure and Pricing - - - Other

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References listed on IDEAS
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  1. Feenstra, Robert C, 1995. "Exact Hedonic Price Indexes," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 634-53, November. [Downloadable!] (restricted)
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  2. G.C. Archibald & B.C. Eaton & Richard Lipsey, 1982. "Address Models of Value Theory," Working Papers 495, Queen's University, Department of Economics.
  3. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August. [Downloadable!] (restricted)
  4. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January. [Downloadable!] (restricted)
  5. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  6. R. Venkatesh & Wagner Kamakura, 2003. "Optimal Bundling and Pricing under a Monopoly: Contrasting Complements and Substitutes from Independently Valued Products," Journal of Business, University of Chicago Press, vol. 76(2), pages 211-232, April. [Downloadable!]
  7. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July. [Downloadable!] (restricted)
  8. Yannis Bakos & Erik Brynjolfsson, 1997. "Bundling Information Goods: Pricing, Profits and Efficiency," Working Paper Series 199, MIT Center for Coordination Science. [Downloadable!]
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