NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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John Turner

Department of Economics
University of Georgia

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Institutional Affiliation: University of Georgia

NBER Working Papers and Publications

July 2015Usage-Based Pricing and Demand for Residential Broadband
with Aviv Nevo, Jonathan W. Williams: w21321
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.

Published: Aviv Nevo & John L. Turner & Jonathan W. Williams, 2016. "Usageā€Based Pricing and Demand for Residential Broadband," Econometrica, Econometric Society, vol. 84, pages 411-443, 03. citation courtesy of

 
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