Abstract

http://ssrn.com/abstract=899662
 
 

References (29)



 
 

Citations (21)



 


 



Does Uncertainty Matter? Consumer Behaviour Under Three-Part Tariffs


Anja Lambrecht


London Business School

Katja Seim


University of Pennsylvania - Business & Public Policy Department

Bernd Skiera


University of Frankfurt - Department of Marketing


Marketing Science, Vol. 26, No. 5, pp. 698-710, September-October 2007

Abstract:     
In communication, information, and other industries, three-part tariffs are increasingly popular. A three-part tariff is defined by an access price, an allowance, and a marginal price for any usage in excess of the allowance. Empirical nonlinear pricing studies have focused on consumer choice under two-part tariffs. We show that consumer behavior differs under three-part tariffs and assess how consumer demand uncertainty impacts tariff choice. We develop a discrete/continuous model of choice among three-part tariffs and estimate it using consumer-level data on Internet usage. Our model extends prior work in accommodating consumer switching to competitors, thereby capturing behavior in competitive industries more accurately. Our empirical work shows that demand uncertainty is a key driver of choice among three-part tariffs. Consumers' expected bill increases with the variation in their usage, steering them toward tariffs with high allowances. Consequently, demand uncertainty decreases consumer surplus and increases provider revenue. A further analysis of consumers' responsiveness to the different elements of a three-part tariff under the provider's current pricing structure reveals that prices affect a consumer's tariff choice more than her usage quantity and that the allowance plays a strong role in consumer tariff choice. Based on our results, we derive implications for pricing with three-part tariffs.

Number of Pages in PDF File: 13

Keywords: Nonlinear Pricing, Discrete/Continuous Choice Model, Internet Access, Three-Part Tariffs, Uncertainty

JEL Classification: M3, M30, M31, L1, L11, L86

Accepted Paper Series


Download This Paper

Date posted: May 8, 2006 ; Last revised: November 30, 2011

Suggested Citation

Lambrecht, Anja and Seim, Katja and Skiera, Bernd, Does Uncertainty Matter? Consumer Behaviour Under Three-Part Tariffs. Marketing Science, Vol. 26, No. 5, pp. 698-710, September-October 2007. Available at SSRN: http://ssrn.com/abstract=899662

Contact Information

Anja Lambrecht (Contact Author)
London Business School ( email )
Regent's Park
London, NW1 4SA
United Kingdom
Katja Seim
University of Pennsylvania - Business & Public Policy Department ( email )
3641 Locust Walk
Philadelphia, PA 19104-6372
United States

Bernd Skiera
University of Frankfurt - Department of Marketing ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
+49 (0)69 798 34640 (Phone)
+49 (0)69 798 35001 (Fax)
HOME PAGE: http://www.ecommerce.wiwi.uni-frankfurt.de/
Feedback to SSRN


Paper statistics
Abstract Views: 3,021
Downloads: 688
Download Rank: 19,672
References:  29
Citations:  21

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.343 seconds