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Three-Part Tariffs and Short-Run Rationality in the Local Fixed Telephone Consumption: Empirical Evidence from Medellín

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  • David Tobón Orozco

    () (Universidad de Antioquia)

Abstract

In this paper we are interested in investigating the effects of the threepart tariffs system on consumers’ behavior in the local fixed telephone service provided by the incumbent Telecommunications Company une in Medellín, which was authorized by the Telecommunications Regulatory Commission (crt, for its Spanish name). In order to study consumer behavior and the effect of this tariff system we specify a sort of Engel Curve, which relates expenditure in fixed telephone service and expenditure in public utilities. Endogeneity problems could well arise from this specification, so the empirical strategy for studying households’ consumption is based on a panel data analysis by performing instrumental variables and gmm procedures. Our results supports the hypothesis that consumers surpass expected consumption levels and therefore the total payment for the service is greater than planned, showing a sort of short-run irrationality in consumption.

Suggested Citation

  • David Tobón Orozco, 2010. "Three-Part Tariffs and Short-Run Rationality in the Local Fixed Telephone Consumption: Empirical Evidence from Medellín," Grupo Microeconomía Aplicada 058, Universidad de Antioquia, Departamento de Economía.
  • Handle: RePEc:lde:grupom:058
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    References listed on IDEAS

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    1. Mark Armstrong, 2016. "Nonlinear Pricing," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 583-614, October.
    2. Richard Blundell & Alan Duncan & Krishna Pendakur, 1998. "Semiparametric estimation and consumer demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 435-461.
    3. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    4. Jorge Barrientos Marín, 2009. "On the Consumer Behavior in Urban Colombia: The Case of Bogotá," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 27(59), pages 83-99, June.
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    More about this item

    Keywords

    three-part tariffs; consumers’ behavior; rationality; endogeneity; gmm estimators;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General

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