Calling Patterns and Usage of Residential Toll Service under Self Selecting Tariffs

Abstract

Using a nested logit model, we empirically show how self-selecting tariffs with basic and OCP (Optional Calling Plan) service options affect households' calling patterns and usage of interstate toll service in the United States. We find, first, that households are more sensitive to price declines than to price increases in terms of both consumption and expenditures. Second, households respond more sensitively to OCP price changes than to basic service price changes. Third, consumption changes are more sensitive than expenditures, indicating that households adjust their calling patterns or service options so as to keep expenditures on telephone bills relatively constant.