IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Doubtful Profitability of Foggy Pricing

This paper studies whether competition may induce firms abandoning deceptive pricing strategies aimed to profit from mistaken choices of consumers. The empirical analysis focuses on the pricing practices of early U.S. cellular firms, both under monopoly and duopoly. Foggy tariff options are those that are dominated by another option or a combination of other tariff options offered by the firm. I also define a measure of fogginess of non-dominated tariffs based on the range of airtime usage for which they are the least expensive option among those available. Results indicate that firms offer more dominated tariff options in a competitive market than under monopoly. While markets are profitable, perhaps because they grow or because firms collude, the use of foggy tactics is not frequent. However, if the market is more mature, or if firms do not cooperate, thus reducing the return to their investment, then they commonly turn to foggy pricing.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.netinst.org/Miravete.pdf
Download Restriction: no

Paper provided by NET Institute in its series Working Papers with number 04-07.

as
in new window

Length: 30 pages
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:net:wpaper:0407
Contact details of provider: Web page: http://www.NETinst.org/

References listed on IDEAS
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.:

as in new window
  1. Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
  2. Malmendier, Ulrike M. & Della Vigna, Stefano, 2003. "Overestimating Self-Control: Evidence from the Health Club Industry," Research Papers 1800, Stanford University, Graduate School of Business.
  3. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826, March.
  4. Jerry A. Hausman, 1994. "Valuation of New Goods under Perfect and Imperfect Competition," NBER Working Papers 4970, National Bureau of Economic Research, Inc.
  5. Malmendier, Ulrike M. & Della Vigna, Stefano, 2003. "Contract Design and Self Control: Theory and Evidence," Research Papers 1801, Stanford University, Graduate School of Business.
  6. Winkelmann, Rainer, 1995. "Duration Dependence and Dispersion in Count-Data Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 467-74, October.
  7. Leslie E. Papke & Jeffrey M. Wooldridge, 1993. "Econometric Methods for Fractional Response Variables with an Application to 401(k) Plan Participation Rates," NBER Technical Working Papers 0147, National Bureau of Economic Research, Inc.
  8. Eugenio J. Miravete, 2005. "The Welfare Performance Of Sequential Pricing Mechanisms ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1321-1360, November.
  9. Katja Seim & V. Brian Viard, 2003. "The Effect Of Entry And Market Structure On Cellular Pricing Tactics," Working Papers 03-13, NET Institute, revised Nov 2003.
  10. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  11. Nicholas Economides & Katja Seim & V. Brian Viard, 2005. "Quantifying the Benefits of Entry into Local Phone Service," Working Papers 05-17, New York University, Leonard N. Stern School of Business, Department of Economics.
  12. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  13. Rochet, Jean-Charles & Stole, Lars A, 2002. "Nonlinear Pricing with Random Participation," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 277-311, January.
  14. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  15. Basaluzzo, Gabriel & Miravete, Eugenio J, 2007. "Constrained Monopoly Pricing with Random Participation," CEPR Discussion Papers 6620, C.E.P.R. Discussion Papers.
  16. Gourieroux Christian & Monfort Alain & Trognon A, 1982. "Pseudo maximum lilelihood methods : applications to poisson models," CEPREMAP Working Papers (Couverture Orange) 8203, CEPREMAP.
  17. Glenn Ellison & Sara Fisher Ellison, 2004. "Search, Obfuscation, and Price Elasticities on the Internet," NBER Working Papers 10570, National Bureau of Economic Research, Inc.
  18. Meghan R. Busse, 2000. "Multimarket Contact and Price Coordination in the Cellular Telephone Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 287-320, 06.
  19. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  20. Miravete, Eugenio J, 2004. "Are all those Calling Plans Really Necessary? The Limited Gains From Complex Tariffs," CEPR Discussion Papers 4237, C.E.P.R. Discussion Papers.
  21. Cameron, A Colin & Windmeijer, Frank A G, 1996. "R-Squared Measures for Count Data Regression Models with Applications to Health-Care Utilization," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 209-20, April.
  22. Philip M. Parker & Lars-Hendrik Roller, 1997. "Collusive Conduct in Duopolies: Multimarket Contact and Cross-Ownership in the Mobile Telephone Industry," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 304-322, Summer.
  23. Jerry HAUSMAN & Gregory LEONARD & J. Douglas ZONA, 1994. "Competitive Analysis with Differentiated Products," Annales d'Economie et de Statistique, ENSAE, issue 34, pages 159-180.
  24. Eugenio J. Miravete, 2003. "Choosing the Wrong Calling Plan? Ignorance and Learning," American Economic Review, American Economic Association, vol. 93(1), pages 297-310, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:net:wpaper:0407. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nicholas Economides)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.