Using the Hicks formula to evaluate an estimate of the elasticity of derived demand for toll-free numbers

Steve G. Parsons

Telecommunications Policy, 2014, vol. 38, issue 2, 210-215

Abstract: Duffy-Deno & Parsons D-D & P (2012) estimated the coefficient for the price elasticity of demand for toll-free numbers (TFNs) at between −0.04 and −0.05. Here, the Hicks formula for derived demand is used to check the range of likely demand elasticity for TFNs given the special characteristics of this market. This approach suggests that the demand for TFNs is likely not more elastic than estimated by D-D & P. Therefore, the premise is sound for D-D & P's discussion of the public policy implications of highly inelastic demand for TFNs. The use of industry information for all four parameters of the Hicks formula to check a derived demand elasticity is the first of its kind in the published literature.

Keywords: Demand elasticity; Derived demand; FCC; Hicks formula; Telecommunications; Toll free (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:telpol:v:38:y:2014:i:2:p:210-215

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DOI: 10.1016/j.telpol.2013.07.002

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