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Ability, location and household demand for Internet bandwidth

  • Savage, Scott James
  • Waldman, Donald M.

This paper examines consumer preferences for Internet bandwidth, focusing on technical ability and urban/rural location as sources of preference heterogeneity. An economic model is outlined that shows that ability decreases the effective price of bandwidth. As a result of this decrease, part of the total effect of an increase in ability will always be an increase in the demand for bandwidth. The implication is empirically investigated with an econometric approach that overcomes the limitations of the aggregated data that is currently available to describe consumer preferences. Results show that high-ability, urban consumers are willing to pay a substantive monthly premium for an improvement in bandwidth relative to rural consumers.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 27 (2009)
Issue (Month): 2 (March)
Pages: 166-174

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Handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:166-174
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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  1. Scott J. Savage & Donald M. Waldman, 2008. "Learning and fatigue during choice experiments: a comparison of online and mail survey modes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(3), pages 351-371.
  2. Forman, Chris & Goldfarb, Avi & Greenstein, Shane, 2005. "How did location affect adoption of the commercial Internet? Global village vs. urban leadership," Journal of Urban Economics, Elsevier, vol. 58(3), pages 389-420, November.
  3. Chinn, Menzie David & Fairlie, Robert W, 2004. "The Determinants of the Global Digital Divide: A Cross-Country Analysis of Computer and Internet Penetration," Santa Cruz Center for International Economics, Working Paper Series qt2r80c4t3, Center for International Economics, UC Santa Cruz.
  4. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267.
  5. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  6. James E. Prieger, 2003. "The Supply Side of the Digital Divide: Is There Equal Availability in the Broadband Internet Access Market?," Working Papers 25, University of California, Davis, Department of Economics.
  7. Bradley T. Heim & Bruce D. Meyer, 2003. "Work Costs and Nonconvex Preferences in the Estimation of Labor Supply Models," NBER Working Papers 9429, National Bureau of Economic Research, Inc.
  8. Prieger, James E. & Hu, Wei-Min, 2008. "The broadband digital divide and the nexus of race, competition, and quality," Information Economics and Policy, Elsevier, vol. 20(2), pages 150-167, June.
  9. Gregory S. Crawford, 2000. "The Impact of the 1992 Cable Act on Household Demand and Welfare," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 422-450, Autumn.
  10. Lee, Jongsu & Kim, Yeonbae & Lee, Jeong-Dong & Park, Yuri, 2006. "Estimating the extent of potential competition in the Korean mobile telecommunications market: Switching costs and number portability," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 107-124, January.
  11. Waldman, Donald M., 1985. "Computation in duration models with heterogeneity," Journal of Econometrics, Elsevier, vol. 28(1), pages 127-134, April.
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