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Estimating the Demand for Service Bundles under Three-Part Tariffs

Version 2 2024-06-05, 09:09
Version 1 2020-02-20, 11:50
journal contribution
posted on 2024-06-05, 09:09 authored by L Chen, Y Luo, P Xiao
© 2020 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd Consumers may face demand uncertainty when choosing a service plan under three-part tariffs, and preferences for multiple services may be inter-dependent. To examine such a demand system, we construct a two-stage discrete/continuous choice model for service bundles, allowing for interactive utility and preference correlations. Implementing a piecewise maximization approach to consumers’ non-differentiable utility maximization problem, we estimate the model via simulated method of moments. We empirically illustrate the model using data from a Chinese wireless service provider. Our counterfactual analysis shows that the three-part tariffs with interchangeable units show no significant loss of revenue, compared to existing tariffs.

History

Journal

Journal of Industrial Economics

Volume

67

Pagination

448-483

Location

London, Eng.

ISSN

0022-1821

eISSN

1467-6451

Language

eng

Publication classification

C Journal article, C1 Refereed article in a scholarly journal

Issue

3-4

Publisher

Wiley