Three-Part Tariffs and Short-Run Rationality in the Local Fixed Telephone Consumption: Empirical Evidence from Medellín 2

Jorge Barrientos (), David Tobón Orozco and John Fredy Bedoya ()

Revista Desarrollo y Sociedad, 2010

Abstract: In this paper we are interested in investigating the effects of the threepart tariffs system on consumers´ behavior in the local fixed telephone service provided by the incumbent Telecommunications Company une in Medellín, which was authorized by the TelecommunicationsRegulatory Commission (crt, for its Spanish name). In order to study consumer behavior and the effect of this tariff system we specify a sort of Engel Curve, which relates expenditure in fixed telephone service and expenditure in public utilities. Endogeneity problems could well arise from this specification, so the empirical strategy for studying households´ consumption is based on a panel data analysis by performing instrumental variables and gmm procedures. Our results supports the hypothesis that consumers surpass expected consumption levels and therefore the total payment for the service is greater than planned, showing a sort of short-run irrationality in consumption.

Keywords: three-part tariffs; consumers´ behavior; rationality; endogeneity; gmm estimators. (search for similar items in EconPapers)
JEL-codes: C14 C33 D12 D60 G38 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Working Paper: Three-Part Tariffs and Short-Run Rationality in the Local Fixed Telephone Consumption: Empirical Evidence from Medellín (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000090:009011

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