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

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.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Economics

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2015

Author dc:creator

• Arango, Carlos Alberto

Contributors dc:contributor

• George M. Deltas

• Business Administration, Marketing

Language dc:language

eng

Identifier

(MiAaPQ)AAI9989932

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/85670