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How zero price affects demand?: experimental evidence from the Moroccan telecommunication market

  • Driouchi, Ahmed
  • Chetioui, Youssef
  • Baddou, Meryem

To select one of several products (or to buy nothing) is a daily decision. Its foundations vary from one person to another and are based on perceptions, preferences, and other criteria. The standard theoretical perspective conveys that people choose options with the highest net benefit. However, the zero price model, proposed by Shampanier, Mazar, and Ariely (SMA) (2007), suggests that decisions about free (zero price) products do not simply subtract costs from benefits but instead perceive other gains and costs associated with free products. This paper tests this second alternative by contrasting demand for telecommunication products in Morocco, mainly SMS and calls. The price difference is maintained between the cheaper and expensive options such that the cheaper product is priced at either a low positive price (cost condition) or zero price (free condition). The results suggest that more participants choose the cheaper option, whereas fewer participants choose the more expensive one. People act as if zero pricing is a special price, as suggested by the zero price model. The paper tests also the affect as an explanation to the zero price effect. The result suggests that the price effect cannot be fully attributed to this dimension.

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File URL: https://mpra.ub.uni-muenchen.de/32352/1/MPRA_paper_32352.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32352.

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Date of creation: 20 Jul 2011
Date of revision: 20 Jul 2011
Handle: RePEc:pra:mprapa:32352
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  1. Peitz, Martin, 2005. "Asymmetric access price regulation in telecommunications markets," European Economic Review, Elsevier, vol. 49(2), pages 341-358, February.
  2. GRUBER, Harald & VERBOVEN, Frank, . "The evolution of markets under entry and standards regulation - The case of a global mobile telecommunications," Working Papers 1999038, University of Antwerp, Faculty of Applied Economics.
  3. Aldo Rustichini & Uri Gneezy, 2000. "A fine is a price," Natural Field Experiments 00258, The Field Experiments Website.
  4. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  5. Jerry A. Hausman, 1997. "Valuing the Effect of Regulation on New Services in Telecommunications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 1-54.
  6. Lyn Squire, 1973. "Some Aspects of Optimal Pricing for Telecommunications," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 515-525, Autumn.
  7. Sippel, Reinhard, 1997. "An Experiment on the Pure Theory of Consumer's Behaviour," Economic Journal, Royal Economic Society, vol. 107(444), pages 1431-44, September.
  8. Kristina Shampanier & Nina Mazar & Dan Ariely, 2007. "Zero as a Special Price: The True Value of Free Products," Marketing Science, INFORMS, vol. 26(6), pages 742-757, 11-12.
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