Demand elasticities for Internet services
Noting the phenomenal growth of the Internet during the last few years, the spectacular nature of the information technology revolution represented by it, and lack of direct studies of demand for Internet services, this paper makes a beginning toward providing price- and income-elasticity estimates by using a simple model and cross-country OECD data for the year 2000. Seven main points are noted. First, the demand seems price-inelastic in all variants estimated by us. Second, the income elasticity appears to be unity or larger, indicating Internet services may not constitute a 'necessity'. Third, the absolute price elasticity seems lower, particularly for the broader price measure, in the group of users than for subscribers. Fourth, the income elasticity also seems smaller for users than for subscribers. Fifth, the income-elasticity estimates suggest that measures to encourage Internet usage through subscriptions might not seem equity enhancing, but encouragement of usage through increased access to non-subscriber users should not carry such an implication. Sixth, the inelastic demand indicates scope for price leverage by providers. Seventh, the inelastic demand might have some revenue implications relative to the possibility of imposing or raising taxes on Internet usage.
Volume (Year): 38 (2006)
Issue (Month): 9 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marco Haan, 2001.
"The Economics of Free Internet Access,"
Journal of Institutional and Theoretical Economics (JITE),
Mohr Siebeck, Tübingen, vol. 157(3), pages 359-359, September.
- Haan, M., 2000. "The economics of free internet access," Research Report 00F49, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Giacomello, Giampiero & Picci, Lucio, 2003. "My scale or your meter? Evaluating methods of measuring the Internet," Information Economics and Policy, Elsevier, vol. 15(3), pages 363-383, September.
- G. Giacomello & L. Picci, 2002. "My Scale or your Meter? Evaluating Methods of Measuring the Internet," Working Papers 447, Dipartimento Scienze Economiche, Universita' di Bologna.
- Madden, Gary & Coble-Neal, Grant, 2002. "Internet Economics and Policy: An Australian Perspective," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 343-357, September.
- Madden, Gary G & Coble-Neal, Grant, 2002. "Internet economics and policy: An Australian perspective," MPRA Paper 10686, University Library of Munich, Germany.
- Kiiski, Sampsa & Pohjola, Matti, 2002. "Cross-country diffusion of the Internet," Information Economics and Policy, Elsevier, vol. 14(2), pages 297-310, June.
- Kiiski, Sampsa & Pohjola, Matti, 2001. "Cross-country Diffusion of the Internet," WIDER Working Paper Series 011, World Institute for Development Economic Research (UNU-WIDER).
- Sampsa Kiiski & Matti Pohjola, 2010. "Cross-country Diffusion of the Internet," Working Papers id:3204, eSocialSciences.
- Donald Bruce & John Deskins & William F. Fox, 2004. "Has Internet Access Taxation Affected Internet Use?," Public Finance Review, , vol. 32(2), pages 131-147, March.
- Greenstein, Shane, 2000. "Building and Delivering the Virtual World: Commercializing Services for Internet Access," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 391-411, December.
- Shane Greenstein, 2000. "Building and Delivering the Virtual World: Commercializing Services for Internet Access," NBER Working Papers 7690, National Bureau of Economic Research, Inc.