Mobile Internet usage and usage‐based pricing

We provide both a theoretical and empirical analysis of mobile Internet usage in the presence of usage based pricing in the form of data caps. We begin by building a simple model of mobile Internet usage, grounded in prior empirical work on home Internet usage. Within the model, we generate empirical predictions for mobile usage, particularly in response to usage based pricing, and we identify conditions where usage based pricing (via a data cap) is not revenue enhancing for providers. Using data on mobile Internet usage of thousands of individuals, we provide some of the first analyses linking mobile usage to key demographics such as income. We find a reverse-U relationship between mobile Internet usage and income – notably different than the monotonically declining relationship found on home devices. We also find a largely monotonically increasing relationship between income and usage intensity, measured by number of page views in a session. Combined with our model, these findings suggest data caps are particularly binding on low-income users and that the use of caps by providers is more likely driven by cost than by revenue enhancement. They further suggest that price discrimination strategies may be more effective in terms of revenue generation if tied to usage intensity rather than duration.

• Publication year

  2019

• Venue

  Journal of Economics and Management Strategy

• Publication date

  2019-11-04

• Fields of study

  Business, Computer Science, Economics

• Identifiers
  DOI 10.2139/ssrn.3480746
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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