IDEAS home Printed from https://ideas.repec.org/p/zbw/dicedp/36.html
   My bibliography  Save this paper

Irrationality rings! - Experimental evidence on mobile tariff choices

Author

Listed:
  • Barth, Anne-Kathrin
  • Graf, Julia

Abstract

This paper investigates why consumers choose calling plans that are not always cost-minimizing. Our approach is twofold: we account for general difficulties facing a tariff choice, as well as for biased preferences. We provide evidence from an experiment among German university students and staff, finding that participants are often not aware of their actual consumption. In line with the findings on at-rate biases, respondents systematically overestimate their consumption. On the other hand, they are generally able and willing to detect optimal tariffs. Furthermore, with increasing usage level, consumers' performance improves. However, some participants hold strong preferences for certain tariff forms, seducing them to choose cost-dominated offers. In our setup, we find that respondents prefer tariffs involving subsidies or hire-purchase options for handsets over contracts with buy now options.

Suggested Citation

  • Barth, Anne-Kathrin & Graf, Julia, 2011. "Irrationality rings! - Experimental evidence on mobile tariff choices," DICE Discussion Papers 36, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:36
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/51563/1/672345536.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hitoshi Mitomo & Tokio Otsuka & Kiminori Nakaba, 2009. "A Behavioral Economic Interpretation of the Preference for Flat Rates: The Case of Post-paid Mobile Phone Services," Contributions to Economics, in: Peter Curwen & Justus Haucap & Brigitte Preissl (ed.), Telecommunication Markets, pages 59-73, Springer.
    2. Hossain Tanjim & Morgan John, 2006. "...Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-30, January.
    3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    4. Haucap, Justus & Heimeshoff, Ulrich, 2011. "Consumer behavior towards on-net/off-net price differentiation," Telecommunications Policy, Elsevier, vol. 35(4), pages 325-332, May.
    5. 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.
    6. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    7. Srinagesh, P., 1992. "A Dynamic Stochastic Model of choice," Papers 78, Bell Communications - Economic Research Group.
    8. Bolle Friedel & Heimel Jana, 2005. "A Fallacy of Dominant Price Vectors in Network Industries," Review of Network Economics, De Gruyter, vol. 4(3), pages 1-8, September.
    9. Clay, Karen B & Sibley, David S & Srinagesh, Padmanabhan, 1992. "Ex Post vs. Ex Ante Pricing: Optional Calling Plans and Tapered Tariffs," Journal of Regulatory Economics, Springer, vol. 4(2), pages 115-138, 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. Muck, Johannes, 2012. "The effect of on-net / off-net differentiation and heterogeneuous consumers on network size in mobile telecommunications : an agent-based aporoach," 23rd European Regional ITS Conference, Vienna 2012 60355, International Telecommunications Society (ITS).
    2. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, vol. 115(1), pages 7-10.
    3. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Clémence Christin, 2013. "Entry Deterrence Through Cooperative R&D Over-Investment," Recherches économiques de Louvain, De Boeck Université, vol. 79(2), pages 5-26.
    5. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-23, June.
    6. Christoph Buehren & Maria Daskalakis, 2020. "Which green nudge helps to save energy? Experimental evidence," MAGKS Papers on Economics 202042, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Christoph Bühren & Maria Daskalakis, 2015. "Do not incentivize eco-friendly behavior - Go for a competition to go green!," MAGKS Papers on Economics 201534, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    8. Mehmet Karacuka & Asad Zaman, 2012. "The empirical evidence against neoclassical utility theory: a review of the literature," International Journal of Pluralism and Economics Education, Inderscience Enterprises Ltd, vol. 3(4), pages 366-414.

    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. Fabian Herweg & Konrad Mierendorff, 2013. "Uncertain Demand, Consumer Loss Aversion, And Flat-Rate Tariffs," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 399-432, April.
    2. Marianne Bertrand & Dean S. Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," Working Papers 918, Economic Growth Center, Yale University.
    3. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    4. Vassilis A. Efthymiou & George N. Leledakis, 2014. "The price impact of the disposition effect on the ex-dividend day of NYSE and AMEX common stocks," Quantitative Finance, Taylor & Francis Journals, vol. 14(4), pages 711-724, April.
    5. Thomas Kourouxous & Thomas Bauer, 2019. "Violations of dominance in decision-making," Business Research, Springer;German Academic Association for Business Research, vol. 12(1), pages 209-239, April.
    6. Pierre-Alexandre Mahieu & François-Charles Wolff & Jason Shogren & Pascal Gastineau, 2017. "Interval bidding in a distribution elicitation format," Applied Economics, Taylor & Francis Journals, vol. 49(51), pages 5200-5211, November.
    7. Wang, Huijun & Yan, Jinghua & Yu, Jianfeng, 2017. "Reference-dependent preferences and the risk–return trade-off," Journal of Financial Economics, Elsevier, vol. 123(2), pages 395-414.
    8. Jonathan de Quidt, 2018. "Your Loss Is My Gain: A Recruitment Experiment with Framed Incentives," Journal of the European Economic Association, European Economic Association, vol. 16(2), pages 522-559.
    9. Li An & Huijun Wang & Jian Wang & Jianfeng Yu, 2020. "Lottery-Related Anomalies: The Role of Reference-Dependent Preferences," Management Science, INFORMS, vol. 66(1), pages 473-501, January.
    10. Leon Vinokur, 2009. "Disposition in the Carbon Market and Institutional Constraints," Working Papers 652, Queen Mary University of London, School of Economics and Finance.
    11. Johannes Voester & Bjoern Ivens & Alexander Leischnig, 2017. "Partitioned pricing: review of the literature and directions for further research," Review of Managerial Science, Springer, vol. 11(4), pages 879-931, October.
    12. Scott B. Jackson & Paul A. Shoemaker & John A. Barrick & F. Greg Burton, 2005. "Taxpayers' Prepayment Positions and Tax Return Preparation Fees," Contemporary Accounting Research, John Wiley & Sons, vol. 22(2), pages 409-447, June.
    13. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    14. Lunn, Pete & Somerville, Jason J., 2015. "Surplus Identification with Non-Linear Returns," Papers WP522, Economic and Social Research Institute (ESRI).
    15. Muck, Johannes, 2012. "The effect of on-net / off-net differentiation and heterogeneuous consumers on network size in mobile telecommunications : an agent-based aporoach," 23rd European Regional ITS Conference, Vienna 2012 60355, International Telecommunications Society (ITS).
    16. Shy, Oz, 2008. "Measuring the cost of making payment decisions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2411-2416, December.
    17. Haucap, Justus & Heimeshoff, Ulrich & Lange, Mirjam R.J., 2016. "The impact of tariff diversity on broadband penetration—An empirical analysis," Telecommunications Policy, Elsevier, vol. 40(8), pages 743-754.
    18. Marco Battaglini, 2005. "Long-Term Contracting with Markovian Consumers," American Economic Review, American Economic Association, vol. 95(3), pages 637-658, June.
    19. Isabel Abinzano & Luis Muga & Rafael Santamaria, 2017. "Behavioral Biases Never Walk Alone," Journal of Sports Economics, , vol. 18(2), pages 99-125, February.
    20. de Quidt, Jonathan, 2014. "Your loss is my gain: a recruitment experiment with framed incentives," LSE Research Online Documents on Economics 58208, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    Behavioral Economics; Mobile phone tariffs; Handset subsidy; Hire-purchase of device;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:zbw:dicedp:36. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/diduede.html .

    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.