Sticky Consumers and Cloud Welfare

49 Pages Posted: 11 Oct 2023

See all articles by Chuqing Jin

Chuqing Jin

University of Toulouse Capitole - Toulouse School of Economics

Sida Peng

Microsoft Corporation

Peichun Wang

Unity Technologies

Date Written: September 14, 2023

Abstract

We estimate welfare benefits of the public cloud and study the impact of customer inertia on welfare. We develop a novel demand model that allows for both multiple product choices and continuous usage, and estimate the model using proprietary customer-level data. We find the average consumer surplus from cloud usage to be 216% of its cost, and that smaller customers disproportionately benefit from public cloud. We also find significant inertia on the cloud, reducing welfare benefits by 62%. Finally, we show that cloud migration services and introductory discounts can improve both consumer surplus and provider revenue.

Keywords: cloud computing, inertia, demand estimation, multiple discrete-continuous choices

JEL Classification: L12, L86, D12, C25

Suggested Citation

Jin, Chuqing and Peng, Sida and Wang, Peichun, Sticky Consumers and Cloud Welfare (September 14, 2023). Available at SSRN: https://ssrn.com/abstract=4573326 or http://dx.doi.org/10.2139/ssrn.4573326

Chuqing Jin (Contact Author)

University of Toulouse Capitole - Toulouse School of Economics ( email )

Toulouse
France

Sida Peng

Microsoft Corporation ( email )

One Microsoft Way
Redmond, WA 98052
United States

Peichun Wang

Unity Technologies ( email )

30 3rd St
San Francisco, CA 94103
United States

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