Usage-Based Pricing and Demand for Residential Broadband

Aviv Nevo, John Turner () and Jonathan W. Williams

No 21321, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We estimate demand for residential broadband using high-frequency data from subscribers facing a three-part tariff. The three-part tariff makes data usage during the billing cycle a dynamic problem; thus, generating variation in the (shadow) price of usage. We provide evidence that subscribers respond to this variation, and use their dynamic decisions to estimate a flexible distribution of willingness to pay for different plan characteristics. Using the estimates, we simulate demand under alternative pricing and find that usage-based pricing eliminates low-value traffic. Furthermore, we show that the costs associated with investment in fiber-optic networks are likely recoverable in some markets, but that there is a large gap between social and private incentives to invest.

JEL-codes: L1 L13 L96 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-com, nep-ict, nep-ind, nep-mkt, nep-reg and nep-ure
Note: IO PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published as Aviv Nevo & John L. Turner & Jonathan W. Williams, 2016. "Usage‐Based Pricing and Demand for Residential Broadband," Econometrica, Econometric Society, vol. 84, pages 411-443, 03.

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