Cellular Service Demand: Biased Beliefs, Learning, and Bill Shock

• 成果类型: Article
• 署名作者: Grubb, Michael D.; Osborne, Matthew
• 署名单位: Boston College; University of Toronto; University of Toronto
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20120283
• 发表日期: 2015
• 页码: 234-271
• 关键词: LOCAL TELEPHONE SERVICE; asymmetric information; health-insurance; 3-PART TARIFFS; brand choice; uncertainty; consumers; MARKETS; usage; experience

摘要

Following FCC pressure to end bill shock, cellular carriers now alert customers when they exceed usage allowances. We estimate a model of plan choice, usage, and learning using a 2002-2004 panel of cellular bills. Accounting for firm price adjustment, we predict that implementing alerts in 2002-2004 would have lowered average annual consumer welfare by $33. We show that consumers are inattentive to past usage, meaning that bill-shock alerts are informative. Additionally, our estimates imply that consumers are overconfident, underestimating the variance of future calling. Overconfidence costs consumers $76 annually at 2002-2004 prices. Absent overconfidence, alerts would have little to no effect.