IDEAS home Printed from https://ideas.repec.org/a/eee/indorg/v27y2009i2p166-174.html
   My bibliography  Save this article

Ability, location and household demand for Internet bandwidth

Author

Listed:
  • Savage, Scott James
  • Waldman, Donald M.

Abstract

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.

Suggested Citation

  • Savage, Scott James & Waldman, Donald M., 2009. "Ability, location and household demand for Internet bandwidth," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 166-174, March.
    • Handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:166-174
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-7187(08)00070-2
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Heim, Bradley T. & Meyer, Bruce D., 2004. "Work costs and nonconvex preferences in the estimation of labor supply models," Journal of Public Economics, Elsevier, vol. 88(11), pages 2323-2338, September.
    2. Menzie D. Chinn & Robert W. Fairlie, 2007. "The determinants of the global digital divide: a cross-country analysis of computer and internet penetration," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 16-44, January.
    3. 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.
    4. 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.
    5. Waldman, Donald M., 1985. "Computation in duration models with heterogeneity," Journal of Econometrics, Elsevier, vol. 28(1), pages 127-134, April.
    6. 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.
    7. Fairlie Robert W, 2004. "Race and the Digital Divide," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-40, September.
    8. 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.
    9. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    10. Yongmin Chen & Scott J Savage, 2011. "The Effects of Competition on the Price for Cable Modem Internet Access," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 201-217, February.
    11. Todd M. Gabe & Jaison R. Abel, 2002. "Deployment of Advanced Telecommunications Infrastructure in Rural America: Measuring the Digital Divide," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(5), pages 1246-1252.
    12. 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.
    13. James E. Prieger, 2003. "The Supply Side of the Digital Divide: Is There Equal Availability in the Broadband Internet Access Market?," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 346-363, April.
    14. James E. Prieger, 2003. "The Supply Side of the Digital Divide: Is There Equal Availability in the Broadband Internet Access Market?," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 346-363, April.
    15. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. John Lai & Nicole O. Widmar & Courtney Bir, 2020. "Eliciting Consumer Willingness to Pay for Home Internet Service: Closing the Digital Divide in the State of Indiana," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(2), pages 263-282, June.
    2. Dolente, Cosimo & Galea, John Joseph & Leporelli, Claudio, 2010. "Next Generation Access and Digital Divide: Opposite Sides of the Same Coin?," 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation 9, International Telecommunications Society (ITS).
    3. Sean Lyons, 2014. "Timing and determinants of local residential broadband adoption: evidence from Ireland," Empirical Economics, Springer, vol. 47(4), pages 1341-1363, December.
    4. Regmi, Sabina & Kim, Ayoung & Mills, Devon P. & Green, John, 2023. "Meta-analysis of Consumer's willingness to pay for broadband," 2023 Annual Meeting, July 23-25, Washington D.C. 335602, Agricultural and Applied Economics Association.
    5. Sadowski, Bert M., 2017. "Advanced users and the adoption of high speed broadband: Results of a living lab study in the Netherlands," Technological Forecasting and Social Change, Elsevier, vol. 115(C), pages 1-14.
    6. Omorobi Garieth Omorobi & Eton Idorenyin Clement & Chuktu Onyinye, 2021. "Digital Divide and Online Instruction Delivery Readiness Among Nigerian Universities in an Era of COVID-19," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 7(4), pages 177-186, 12-2021.
    7. Khanal, Aditya R. & Mishra, Ashok K., 2013. "Assessing the Impact of Internet Access on Household Income and Financial Performance of Small Farms," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143019, Southern Agricultural Economics Association.
    8. Liu, Yu-Hsin & Prince, Jeffrey & Wallsten, Scott, 2018. "Distinguishing bandwidth and latency in households’ willingness-to-pay for broadband internet speed," Information Economics and Policy, Elsevier, vol. 45(C), pages 1-15.
    9. Kim, Yongwon & Kim, Yongkyu, 2020. "The Value of Wi-Fi as Entertainment: An Application to Free Wi-Fi in City Buses of Korea," ITS Conference, Online Event 2020 224863, International Telecommunications Society (ITS).
    10. Julian Hidalgo & Michelle Sovinsky, 2023. "Internet (Power) to the People: How to Bridge the Digital Divide," CRC TR 224 Discussion Paper Series crctr224_2023_461, University of Bonn and University of Mannheim, Germany.
    11. Urama, Nathaniel E. & Ogbu, Osita, 2018. "Evaluating consumer perception and willingness to pay for broadband in Nigeria," Telecommunications Policy, Elsevier, vol. 42(6), pages 421-432.
    12. Andre Boik & Shane Greenstein & Jeffrey Prince, 2016. "The Empirical Economics of Online Attention," NBER Working Papers 22427, National Bureau of Economic Research, Inc.
    13. Rosston Gregory L. & Savage Scott J & Waldman Donald M, 2010. "Household Demand for Broadband Internet in 2010," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-45, September.
    14. Stephen McDonald & Colin Wren, 2017. "Consumer Search Ability, Price Dispersion and the Digital Divide," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(2), pages 234-250, April.
    15. Aron Debra J. & Ingraham Allan T., 2012. "The Effects of Legacy Pricing Regulation on Adoption of Broadband Service in the United States," Review of Network Economics, De Gruyter, vol. 11(4), pages 1-38, December.
    16. Srinuan, Chalita & Bohlin, Erik, 2011. "Understanding the digital divide: A literature survey and ways forward," 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues 52191, International Telecommunications Society (ITS).
    17. Worden, David & Hambly, Helen, 2022. "Willingness to pay and pricing for broadband across the rural/urban divide in Canada," Telecommunications Policy, Elsevier, vol. 46(2).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Song, Moohoun & Orazem, Peter & Singh, Rajesh, 2006. "Broadband Access, Telecommuting and the Urban-Rural Digital Divide," Staff General Research Papers Archive 12495, Iowa State University, Department of Economics.
    2. James Prieger, 2015. "The broadband digital divide and the benefits of mobile broadband for minorities," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(3), pages 373-400, September.
    3. Mack, Elizabeth A. & Grubesic, Tony H., 2009. "Forecasting broadband provision," Information Economics and Policy, Elsevier, vol. 21(4), pages 297-311, November.
    4. Rosston Gregory L. & Savage Scott J & Waldman Donald M, 2010. "Household Demand for Broadband Internet in 2010," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-45, September.
    5. Silva, Simone & Badasyan, Narine & Busby, Michael, 2018. "Diversity and digital divide: Using the National Broadband Map to identify the non-adopters of broadband," Telecommunications Policy, Elsevier, vol. 42(5), pages 361-373.
    6. Douglas Cumming & Sofia Johan, 2010. "The Differential Impact of the Internet on Spurring Regional Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 34(5), pages 857-884, September.
    7. Jiao Xu & Chris Forman & Yu Jeffrey Hu, 2019. "Battle of the Internet Channels: How Do Mobile and Fixed-Line Quality Drive Internet Use?," Service Science, INFORMS, vol. 30(1), pages 65-80, March.
    8. Prieger, James E., 2013. "The broadband digital divide and the economic benefits of mobile broadband for rural areas," Telecommunications Policy, Elsevier, vol. 37(6), pages 483-502.
    9. Jason Chan & Anindya Ghose & Robert Seamans, 2013. "The Internet and Hate Crime: Offline Spillovers from Online Access," Working Papers 13-02, NET Institute.
    10. Gabor Molnar & Scott J. Savage, 2017. "Market Structure and Broadband Internet Quality," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 73-104, March.
    11. Tony H. Grubesic, 2015. "The Broadband Provision Tensor," Growth and Change, Wiley Blackwell, vol. 46(1), pages 58-80, March.
    12. Chris Forman, 2013. "How has information technology use shaped the geography of economic activity?," Chapters, in: Frank Giarratani & Geoffrey J.D. Hewings & Philip McCann (ed.), Handbook of Industry Studies and Economic Geography, chapter 10, pages 253-270, Edward Elgar Publishing.
    13. Connolly Michelle & Prieger James E., 2013. "A Basic Analysis of Entry and Exit in the US Broadband Market, 2005–2008," Review of Network Economics, De Gruyter, vol. 12(3), pages 229-270, September.
    14. Sean Lyons, 2014. "Timing and determinants of local residential broadband adoption: evidence from Ireland," Empirical Economics, Springer, vol. 47(4), pages 1341-1363, December.
    15. 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.
    16. Victor Glass & Stela Stefanova, 2010. "An empirical study of broadband diffusion in rural America," Journal of Regulatory Economics, Springer, vol. 38(1), pages 70-85, August.
    17. Grubesic, Tony H., 2012. "The U.S. National Broadband Map: Data limitations and implications," Telecommunications Policy, Elsevier, vol. 36(2), pages 113-126.
    18. Elizabeth A. Mack, 2014. "Broadband and knowledge intensive firm clusters: Essential link or auxiliary connection?," Papers in Regional Science, Wiley Blackwell, vol. 93(1), pages 3-29, March.
    19. Aldashev, Alisher & Batkeyev, Birzhan, 2021. "Broadband Infrastructure and Economic Growth in Rural Areas," Information Economics and Policy, Elsevier, vol. 57(C).
    20. Paul Ellickson & Sanjog Misra, 2012. "Enriching interactions: Incorporating outcome data into static discrete games," Quantitative Marketing and Economics (QME), Springer, vol. 10(1), pages 1-26, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:166-174. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505551 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.