Consumer behavior towards on-net/off-net price differentiation

Justus Haucap and Ulrich Heimeshoff ()

No 16, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: This paper explores how consumers react towards price differentiation between on-net and off-net calls in mobile telecommunications - a pricing policy that is common in many mobile telecommunications markets. Based on a survey of 1044 students we demonstrate that some consumers may suffer from a 'price differentiation bias', i.e., a fair number of consumers may overestimate the savings that result from reduced on-net and/or off-net charges, as they do not appear to weigh the prices with the probabilities of placing off-net and on-net calls. This may help to explain why it have been the smaller operators in various countries who have introduced on-net/off-net price differentiation. We also discuss the implications that such a consumer bias may have for market competition.

JEL-codes: L40 L96 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-com and nep-mkt
References: View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Journal Article: Consumer behavior towards on-net/off-net price differentiation (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:16

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