Abstract

http://ssrn.com/abstract=2116879
 
 

References (20)



 
 

Footnotes (21)



 


 



Pricing Misperceptions: Explaining Pricing Structure in the Cell Phone Service Market


Oren Bar‐Gill


affiliation not provided to SSRN

Rebecca Stone


University of California, Los Angeles

September 2012

Journal of Empirical Legal Studies, Vol. 9, Issue 3, pp. 430-456, 2012

Abstract:     
The cell phone service market is an economically significant market that has substantially increased consumer welfare. In this article, we focus on the pricing of cell phone service. The common pricing structure is a three‐part tariff comprising: (1) a monthly charge; (2) a fixed number of minutes that the monthly charge pays for; and (3) a per‐minute price for minutes beyond the plan limit. Using a unique data set of consumer‐level monthly billing and usage information for 3,730 consumers at a single wireless provider, we evaluate the explanatory power of three accounts of the three‐part tariff: a rational choice account; a behavioral account proposed by Grubb (2009) that supposes that consumers are overconfident in their estimates of their future usage; and a second behavioral account that posits that some consumers overestimate their average future usage while others underestimate it. We quantify the mistakes that consumers make in plan choice and, extrapolating from our data, estimate that these mistakes cost U.S. consumers over $13 billion annually. Our analysis suggests that regulation mandating the disclosure of product use information can be socially desirable in the cell phone service market.

Number of Pages in PDF File: 27

Accepted Paper Series


Date posted: July 25, 2012  

Suggested Citation

Bar‐Gill, Oren and Stone, Rebecca, Pricing Misperceptions: Explaining Pricing Structure in the Cell Phone Service Market (September 2012). Journal of Empirical Legal Studies, Vol. 9, Issue 3, pp. 430-456, 2012. Available at SSRN: http://ssrn.com/abstract=2116879 or http://dx.doi.org/10.1111/j.1740-1461.2012.01258.x

Contact Information

Oren Bar‐Gill (Contact Author)
affiliation not provided to SSRN
No Address Available
Rebecca Stone
University of California, Los Angeles ( email )
405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States
Feedback to SSRN


Paper statistics
Abstract Views: 258
Downloads: 1
References:  20
Footnotes:  21

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.266 seconds