Estimation of information value on the Internet: application of hedonic price model

Abstract

This paper estimates the value of Internet information by using the hedonic price model (HPM). We specify a hedonic price function, and measure the consumer’s willingness to pay for attributes to the Internet connection charge. We also identify a functional form for the HPM by using the Box–Cox transformation of the variables in our analysis. Our results indicate that the variation in the Internet connection charge is dependent upon the amount of information searching and e-shopping. We also find that the power functional form provides the best fit in describing the relationship between the Internet connection charge and the service characteristics. Based on the results of this paper, we expect that the economic value on Internet information will become larger than at present since Internet information usage is increasing. Thus, ISP or content providers seeking price discrimination can charge for information service instead of offering it for free if the firms segment their customers by the differential willingness to pay for each information.