Are Consumers Myopic? Evidence from Handset and Mobile Services Choices

26 Pages Posted: 21 Dec 2015 Last revised: 7 Nov 2017

Date Written: July 20, 2017

Abstract

This paper estimates a discrete choice model for combination of mobile tariffs and handsets using a crosssection of 12 341 new customers observed from October 2011 to December 2014, from a European telecommunications carrier. Estimation from this model enables to assess consumer’s myopia in an original unexplored set-up, namely the trade-off between current and future expenses individuals make when choosing a handset and a mobile plan. I show that, under assumptions underlying the econometric model, consumer myopia decreases sharply after take-off of sim-only plans. This finding means that, on average, individuals tend to correctly tradeoff current and future expense when both services and handsets markets offer alternatives which actually enables consumers to do so. On average, in 2014, consumers are showing only modest undervaluation, reasonably close to myopia assessed in other set-ups such as car purchase.

Keywords: Consumer myopia; Mobile services; Heterogeneous preferences

JEL Classification: L96

Suggested Citation

Nicolle, Ambre, Are Consumers Myopic? Evidence from Handset and Mobile Services Choices (July 20, 2017). Available at SSRN: https://ssrn.com/abstract=2706391 or http://dx.doi.org/10.2139/ssrn.2706391

Ambre Nicolle (Contact Author)

ISTO, LMU Munich ( email )

Kaulbachstr, 45
Munich, 80539
Germany

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