Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Cap <20 min ($2) <20 min $49 cap ($230)$79 cap ($500) $49 cap ($230)
off peak only ($1.49) $79 cap ($500)$149 cap $69 cap ($400)
($1200) $129 cap
($800)
$149 cap
($1300)
Assumptions
● Calls modelled are long distance within Australia, and to
mobiles within Australia;
● Distributions of call durations as below, with means of 5 and 10
minutes respectively;
● Ownership of a mobile on a base plan (the lowest cost) is
assumed for each mobile network;
● Calls switched to mobiles have the same distribution as the
distribution they were drawn from. That is, consumers do not
only switch calls of a particular duration from fixed to mobiles -
this is a future line of analysis;
● 50% of calls are in the peak period;
● 70% of calls are to fixed lines, 30% to mobiles. The phone of
choice is independent of whether the call is made in peak
period or not – this assumption can easily be relaxed with
appropriate data; and
● 45% of calls to mobiles are to Telstra mobiles (reflecting
Telstra’s share of the mobile market).
Call Patterns (5 min
average)
0.018
0.016
Switching from Telstra
Complete to Mobile
Hutchison
350 Vodafone
Optus
5 min
250
average
Nera analysis
Switching from Telstra
Plus 1.49 to Mobile
Hutchison
350 Vodafone
Optus
5 min
250
average
Nera analysis
Switching from Telstra
Complete to Mobile
Hutchison
350 Vodafone
Optus
10 min
250
average
Nera analysis
Switching from Telstra
Plus 1.49 to Mobile
350 Hutchison
Vodafone
Optus
10 min
250
average
Nera analysis
Summary
● Difficult to compare price offers
● Depends on a consumer’s specific calling pattern.
● Networks differentiate on call duration
● Mobiles are a potential substitute for fixed line calls
● Imperfect analysis but substantial savings possible
● ‘Sleepy Incumbent’ (rather than ‘Diamond Paradox’
model) alive and well in telcos
Welfare
Loss Supply
Pn
P*
Naïve Demand
Demand
Q* Qn
Impact of reduced
competition
$ Supply without competition
Supply with
competition
Pm
Overall welfare is
Pn
increased!
P* Consumer welfare
may not be improved.
Naïve Demand
Demand
Q* Qm Qn
Bundling and add-on
pricing
●Buy one product (hotel, groceries) and
then buy another (phone calls, petrol)
●Consumer reaction
●Sophisticated consumers anticipate add-on
prices and substitute away (benefit of lower
price for initial good)
●Naïve consumers do not anticipate prices and
over-consume
●Firms price first good low and naives cross-
subsidise sophisticates
●Suspicious of bundling without any
efficiency or value rationale.
Educating consumers
●Under monopoly,
●May have incentive to educate naives if
don’t want to price discriminate against
them
●Under competition,
●If educate a naïve, then they learn to
substitute away – go to another firm and
receive cross subsidy
●No incentive for a firm to educate
●Education is a public good
Conclusions
● Implication of behavioural economics: cannot rely on
competition to protect naïve consumers
● Difficult to exercise consumer choice
● Competition generates more supply of things they don’t want
● Education and information are public goods (under-
provision in market place)
● Regulators should focus attention on undesirable
practices
● E.g., disconnection fees, automatic renewal fees, unbundling
● Critical for future issues such as cross-media ownership