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Wolk, Agnieszka
Skiera, Bernd
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[Journal:] BuR - Business Research [ISSN:] 1866-8658 [Volume:] 3 [Year:] 2010 [Issue:] 1 [Pages:] 70-80
For many services, consumers can choose among a range of optional tariffs that differ in their access and usage prices. Recent studies indicate that tariff-specific preferences may lead consumers to choose a tariff that does not minimize their expected billing rate. This study analyzes how tariff-specific preferences influence the responsiveness of consumers’ usage and tariff choice to changes in price. We show that consumer heterogeneity in tariff-specific preferences leads to heterogeneity in their sensitivity to price changes. Specifically, consumers with tariff-specific preferences are less sensitive to price increases of their preferred tariff than other consumers. Our results provide an additional reason why firms should offer multiple tariffs rather than a uniform nonlinear pricing plan to extract maximum consumer surplus.
flat rate
flat-rate bias
nonlinear pricing
pay-per-use bias
price elasticity
tariff choice
tariff-specific preferences
three-part tariffs
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