Econometrica Vol. 84 No. 2 2016
Usage-Based Pricing and Demand for Residential Broadband
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 we 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.
- DOI
- 10.3982/ecta11927
- Volume
- 84
- Issue
- 2
- Pages
- 411-443
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref