Flat-rate Plans Research Articles

Biased choice of a mobile telephony tariff type:: Exploring usage boundary perceptions as a cognitive cause in choosing between a use-based or a flat rate plan

Most mobile network operators provide newly acquired or existing customers with the possibility to choose between a monthly flat rate for unlimited voice calls and pay-per-minute price schemes. Consumers who maximize their utility should select the tariff type that leads to the lowest invoice amount given their anticipated service usage volume. However, previous research looking at users of fixed network telephony, broadband Internet access and other services suggests that a significant share of consumers prefers a flat rate to use-dependent price plans even though their invoice will be higher. One cognitive explanation for such biased choices is that consumers consider the ratio of the likelihood of calling enough to justify a flat rate to the probability of not calling enough to save money with a fixed price (= “ratio rule”) when choosing between the two tariff types. In this assessment they overestimate the first likelihood in proportion to the second one. Drawing on a sample of 203 mobile telephony customers in Germany the present study shows that mobile users are biased in favor of a flat rate because they overestimate their future call usage and behave in line with the “ratio rule” when choosing a tariff type. Correlates of cognitively biased tariff choices are explored. With regard to pricing practices it is concluded that managers should not follow the temptation to exploit the overestimation bias in designing pricing and advertising policies pushing customers into fixed price schemes, which do not fit their actual calling patterns.

How to charge for network services – flat-rate or usage-based?

Currently, the Internet service provider market offers two different types of pricing plans. In the USA, the predominant pricing plan is a flat-rate plan. In Europe and Asia, the predominant one is a per-minute pricing plan. Enrolled in such a pricing plan, users have to pay for the connect time to the Internet. Although Internet Service Providers (ISPs) have competed heavily for users in these last few years, they only have focused on trying to offer the lowest price within such pricing plans. A potentially more profitable and sustainable method of doing business would be for ISPs to differentiate themselves by offering more customized pricing plans for certain user groups. An important question then is whether a pricing plan exists that is attractive to users, but also allows ISPs to build a sustainable business. Based on empirical results of the INternet Demand EXperiment (INDEX) project, we discuss a pricing plan for Internet access that appears to be appreciated by Internet users as well as by ISPs. This pricing plan combines the advantages of flat-rate pricing and usage-based pricing. Users will benefit by receiving unlimited access to a basic service with the choice of higher quality of service (QoS) whenever they demand. From the ISPs' perspective, such a pricing plan will help any ISP to focus on certain user groups and to reduce peak network load.

Determinants and Process of the Choice of Goal Difficulty

A laboratory study was designed to examine the impact of methods of payment (piece-rate vs. hourly flat-rate), choice of self-set goals (hard, easy, and free-choice), and self-esteem on the choice of goal difficulty. A significant (p = .01) two-way interaction between task-specific self-esteem and methods of payment was found to influence the choice of goal difficulty. High task-specific self-esteem subjects-as opposed to low task-specific self-esteem subjects-set significantly harder goals under the piece-rate plans than under the hourly flat-rate plans. In addition, a significant (p = .003) two-way interaction between choice of self-set goals and task-specific self-esteem was found to influence perceived total valences of job performance. Perceived total valences of job performance mediates the effects of task-specific self-esteem and choice of self-set goals on the choice of goal difficulty.

NSF drops flat-rate plan for grants in mathematics

NSF drops flat-rate plan for grants in mathematics