Multipart tariffs and bounded rationality: An experimental analysis of mobile phone plan choices

Lana Friesen and Peter Earl

Journal of Economic Behavior & Organization, 2015, vol. 116, issue C, 239-253

Abstract: Multipart tariff structures add to the computational challenges in choosing mobile phone connection services. We study the quality of decision making in a laboratory environment where consumers only face a small set of mobile phone plan options but have to contend with different degrees of tariff complexity as well as uncertain usage. Our main finding is that simply eliminating the multipart tariff structure does not necessarily lead to better decisions. Rather it is multipart tariffs with included values in excess of monthly fees, thus entailing two-tier pricing structures with increasing marginal costs, which lead to the worst decisions. Knowledgeable participants, who understand mobile phone plan pricing, make significantly better choices.

Keywords: Complexity; Laboratory experiments; Mobile phone pricing; Nonlinear pricing; Cellular (search for similar items in EconPapers)
JEL-codes: C91 D43 D83 L51 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:116:y:2015:i:c:p:239-253

DOI: 10.1016/j.jebo.2015.04.016

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