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The willingness to pay for broadband of non-adopters in the U.S.: Estimates from a multi-state survey

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  • Carare, Octavian
  • McGovern, Chris
  • Noriega, Raquel
  • Schwarz, Jay

Abstract

We use data from a large-scale survey of non-adopting households to provide estimates of their willingness to pay for broadband. A large fraction – approximately 2/3 – of the reporting households indicated that they would not consider subscribing to broadband at any price. For the remaining households who indicated that they would consider subscribing, we find strong evidence in the data of over-reporting at high values of the willingness to pay for broadband. We correct for reporting bias using a semi-parametric procedure. Our estimate of the price elasticity of demand for broadband using the bias-corrected willingness to pay values is equal to −0.62, markedly different from the estimate of −0.95 obtained with the values reported by the survey respondents. Our estimates indicate that, on average, to achieve a 10% increase in subscribership, a price reduction of about 15% is needed. In addition, we estimate the impact of several household characteristics on the likelihood of broadband adoption.

Suggested Citation

  • Carare, Octavian & McGovern, Chris & Noriega, Raquel & Schwarz, Jay, 2015. "The willingness to pay for broadband of non-adopters in the U.S.: Estimates from a multi-state survey," Information Economics and Policy, Elsevier, vol. 30(C), pages 19-35.
    • Handle: RePEc:eee:iepoli:v:30:y:2015:i:c:p:19-35
    DOI: 10.1016/j.infoecopol.2014.12.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Telecommunications; Broadband; Demand estimation; Survey data; Reporting bias;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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