Price discrimination in service industries

Lambrecht, Anja; Seim, Katja; Vilcassim, Naufel J.; Cheema, Amar; Chen, Yuxin; Crawford, Gregory S.; Hosanagar, Kartik; Iyengar, Raghuram; Koenigsberg, Oded; Lee, Robin; Miravete, Eugenio J.; Şahin, Özge

doi:10.1007/s11002-012-9187-0

Cited by 38 publications

(21 citation statements)

References 54 publications

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“…Similar empirical patterns of price discrimination have been observed across a range of imperfectly competitive markets (Asplund, Eriksson, & Strand, ; Busse & Rysman, ; Lambrecht et al., ; McManus, ). The added element here is the expansion of a means‐tested benefit program, allowing firms to market directly to low‐income households, without making the product available to households with higher incomes.…”

Section: Background and Mechanismssupporting

confidence: 66%

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Crowd‐Out or Affordability? The Lifeline Expansion's Effect on Wireless Service Spending

Conkling¹

2018

J Policy Anal Manage

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Public subsidization of private goods often leads to crowd‐out, reducing private spending. This effect is intended for a policy such as the 2008 Lifeline phone subsidy expansion, which aimed to increase affordable access to services. I examine the effects of this policy on households’ self‐reported wireless phone service spending in the Consumer Expenditure Survey. Using state‐level variation in policy implementation and triple‐differences event study methods, I estimate that the expansion reduced households’ wireless service spending by more than 100 percent of subsidy payments. I document that the expansion led to a separate, competitive market for providers catering to low‐income households. Consequently, higher‐quality subsidized services crowded out lower‐quality unsubsidized options, saving households more than an equivalent cash transfer. This highlights how market segmentation and competition can magnify a targeted subsidy's impact.

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Section: Background and Mechanismssupporting

confidence: 66%

“…For empirical evidence, see Asplund, Eriksson, and Strand (); Busse and Rysman (); McManus (); and the literature survey by Lambrecht et al. ().…”

mentioning

confidence: 99%

Crowd‐Out or Affordability? The Lifeline Expansion's Effect on Wireless Service Spending

Conkling¹

2018

J Policy Anal Manage

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“…We stress that more complex solutions with more pricing tiers on segmented user base and price di↵erentiation [12] or has di↵erent form of social incentives, may o↵er even higher gains than those we compute with caps. However we demonstrate that simple cap-based solutions have potential to eliminate the bulk of the cross-subsidizations and hence there is limited room for extracting higher profit without increasing the prices on existing customers.…”

Section: Why Volume Caps?mentioning

confidence: 75%

Last call for the buffet

Blackburn

Stanojevic

Erramilli

et al. 2013

Proceedings of the 19th Annual International Conference on Mobile Computing &Amp; Networking - MobiCom '13

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Voice and data tra c growth over the last several years has become a major challenge for cellular operators with a direct impact on revenues, infrastructure investments, and enduser performance. The economics of these operators depend on various incentives used to attract users in the form of unlimited, bu↵et-like voice/sms/data packages. However, our understanding of the e↵ects of user behavior under these o↵erings on operator revenues/costs remains poor. Using two years of detailed usage information of ⇠ 1 million users across three services, voice, sms and data, combined with payment and cost information, we study how user behavior a↵ects the economics of cellular operators. We discover that around 20% of the users consume more resources than what they pay for and hence are non-profitable. In addition to the individual user behavior, we study how the user interactions in the call graph a↵ect the operator's revenues and cost, drawing on tools from social network analysis. We develop a framework that incorporates both the individual and social user behavior for studying how volume caps influence the revenues and the tra c costs. Using this framework we empirically show that volume caps can increase the di↵erence between the revenues and the tra c costs of the studied operator by a factor of 2, while a↵ecting only 16% of the existing user base.

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“…The theory of price discrimination (see Lambrecht et al, 2012, for a detailed review) indicates that a service provider can potentially extract greater returns from different types of consumers that may enable the provider to increase the quantity of services to poorer households while recovering costs. This study assumes that the service provider functions in a non-competitive environment where prices of services can be decided by the provider or a policy maker rather than being an outcome of a competitive market environment.…”

Section: Pricing Strategiesmentioning

confidence: 99%

Increasing access to water services: a cost-recoverable pricing model

Chun¹

2014

International Journal of Water Resources Development

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Pricing policies can serve as a low-cost and effective tool for increasing access to water and sanitation services among poor households while allowing the provider to recover costs. An empirical model is applied to contingent-valuation survey data for water services in Cebu, Philippines. Pricing policies that utilizes a low one-time connection fee and differentiates tariffs based on wealth results in a 3 to 9-fold increase in water services access by poor households over the base pricing policy. The results provide evidence that price-discrimination techniques can be important tools toward achieving greater coverage and financial solvency of important services.

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Price discrimination in service industries

Cited by 38 publications

References 54 publications

Crowd‐Out or Affordability? The Lifeline Expansion's Effect on Wireless Service Spending

Crowd‐Out or Affordability? The Lifeline Expansion's Effect on Wireless Service Spending

Last call for the buffet

Increasing access to water services: a cost-recoverable pricing model

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