Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105159
Authors: 
Köhler, Philip
Krämer, Jan
Krüger, Lars
Year of Publication: 
2014
Citation: 
[Journal:] Business Research [ISSN:] 2198-2627 [Publisher:] Springer [Place:] Heidelberg [Volume:] 7 [Year:] 2014 [Issue:] 1 [Pages:] 161-190
Abstract: 
Cost cap tariffs are pay-per-use tariffs for which costs cannot exceed a predefined cost limit. They were recently introduced to telecommunications markets, but were previously also applied in the insurance industry as deductibles or in the rental industry as day rates. This paper develops and empirically validates a consumer surplus model that explains the optimal consumption pattern under cost cap tariffs and the conditions under which cost cap tariffs are chosen over pure pay-per-use and flat rate tariffs by a rational consumer. We find that cost cap tariffs are an optimal tariff choice only if the level of uncertainty is sufficiently high. Our theoretical predictions are supported by survey data.
Subjects: 
Tariff choice
Consumer surplus model
Cost cap tariff
Pay-per-use tariff
Flat rate tariff
Tariff bias
Service industries
Telecommunications
Tariff bias
JEL: 
D11
D12
M31
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/2.0/
Document Type: 
Article

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