Estimating Switching Costs for Telecommunications Services and Bundles

33 Pages Posted: 1 Mar 2021 Last revised: 8 Jan 2022

See all articles by Gene Hyungjin Kim

Gene Hyungjin Kim

University of Pittsburgh - Department of Economics

Hyunchul Kim

Sungkyunkwan University

Date Written: January 3, 2022

Abstract

We develop a consumer level demand model of telecommunications and broadcasting services considering an exhaustive set of alternatives available to consumers including bundled services. We then estimate switching costs associated with bundling. Previous studies consider restricted choice sets confined to the choices of only one or two services, and abstract away from interrelation among different services through bundling. We find that our approach improves the accuracy of switching cost estimates compared to when the choice sets are restricted in the demand model. Our results also indicate that switching costs incurred with bundling are substantial making up about 65% of monthly costs for the services.

Keywords: Switching costs, Lock-in effects, Bundling, Consumer demand, Mixed logit

JEL Classification: L13, L41, L96

Suggested Citation

Kim, Gene Hyungjin and Kim, Hyunchul, Estimating Switching Costs for Telecommunications Services and Bundles (January 3, 2022). Available at SSRN: https://ssrn.com/abstract=3787321 or http://dx.doi.org/10.2139/ssrn.3787321

Gene Hyungjin Kim

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States

Hyunchul Kim (Contact Author)

Sungkyunkwan University ( email )

25-2 Sungkyunkwan-ro
Jongno-gu
Seoul, 03063
Korea, Republic of (South Korea)

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