Consumer Search and Price Discrimination: Theory and Evidence From the United States Long-Distance Market

Arango, Carlos Alberto

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Description

Title

Consumer Search and Price Discrimination: Theory and Evidence From the United States Long-Distance Market

Author(s)

Arango, Carlos Alberto

Issue Date

2000

Doctoral Committee Chair(s)

George M. Deltas

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

Business Administration, Marketing

Language

eng

Abstract

I also introduce a two-stage long distance carrier choice model that incorporates choice set restrictions based on costly search. I find that cross firm price elasticities for high volume consumers are 87% higher than for low volume consumers based on their lifetime search experience. In addition, it is estimated that, conditional on consumers being fully informed about prices, a 1% increment in the price spread between AT&T and other long distance carriers would lead to a 4% reduction in AT&T market share. However, quantile regression estimates show that household long distance demand price elasticities are higher for light callers. Together, the results suggest that, although low volume consumers tend to be less informed about price differences across calling plans, their higher price elasticity limits the average price that they pay. The findings presented in this thesis have specific implications for regulatory policy. In markets facing new competition (e.g., local telephone service, electricity service), competition is likely to emerge first and be more vigorous for higher volume consumers. Hence, deregulation should be stronger for services aimed at this group of consumers.

Graduation Semester

2000

Type of Resource

text

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