44 Pages Posted: 20 Dec 2014 Last revised: 14 Jun 2017
Date Written: December 19, 2014
We study how individual smartphone users dynamically use mobile data every day facing limited monthly data plans. Employing a unique data set on users' daily data usage from a leading mobile carrier in China, we develop a dynamic structural model in which an individual user maximizes her data usage utility considering the intertemporal trade-off between current and future consumption. We derive theoretical properties of the model to uncover users' dynamic usage patterns. Based on these theoretical results, we construct an empirical test to identify forward-looking users and control for possible consumer myopia. Our model with individual-specific parameters fully captures the significant heterogeneity among mobile data users. We estimate the structural parameters for forward-looking users individually in a computationally efficient manner. Simulated usage data using the model estimates well capture the dynamic trends observed in the actual data. Our counterfactual simulations show how to design profitable promotion strategies targeting forward-looking users in contrast to unprofitable blanket promotions applied to all consumers.
Keywords: mobile data; dynamic usage pattern; forward-looking behavior; individual heterogeneity; targeted promotion; price sensitivity; dynamic structural model
Suggested Citation: Suggested Citation
Xu, Lizhen and Duan, Jason A. and Hu, Yu Jeffrey and Cheng, Yuan and Zhu, Yan, Forward-Looking Behavior in Mobile Data Consumption and Targeted Promotion Design: A Dynamic Structural Model (December 19, 2014). Available at SSRN: https://ssrn.com/abstract=2540533 or http://dx.doi.org/10.2139/ssrn.2540533