Usage-Based Pricing and Demand for Residential Broadband / Aviv Nevo, John L. Turner, Jonathan W. Williams.

Format:

Book

Author/Creator:

Nevo, Aviv.

Contributor:

National Bureau of Economic Research.

Turner, John L.

Williams, Jonathan W.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21321.

NBER working paper series no. w21321

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

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 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.

Notes:

Print version record

July 2015.