We study the properties of simple mobile broadband Internet plans characterized by a data cap and an up-front price. Assuming demand uncertainty and a positive correlation between users’ valuations and (expected) demands, we show that a monopolistic provider does always find it convenient to offer one plan with binding cap together with an unlimited one. We characterize all the elements of the profit-maximizing plans, showing that medium users, but not heavy users, will incur the risk of being capped, and that, relative to the benchmark case of unlimited access only, the introduction of a plan with cap leads to a redistribution of surplus from high users to low users. The overall effect on social welfare and users’ surplus is, in general, ambiguous, but is certainly negative if low valuation users have a sufficiently homogeneous demand for Internet traffic.

The impact of data caps on mobile broadband Internet access: A welfare analysis

Stefano Galavotti
;
2020-01-01

Abstract

We study the properties of simple mobile broadband Internet plans characterized by a data cap and an up-front price. Assuming demand uncertainty and a positive correlation between users’ valuations and (expected) demands, we show that a monopolistic provider does always find it convenient to offer one plan with binding cap together with an unlimited one. We characterize all the elements of the profit-maximizing plans, showing that medium users, but not heavy users, will incur the risk of being capped, and that, relative to the benchmark case of unlimited access only, the introduction of a plan with cap leads to a redistribution of surplus from high users to low users. The overall effect on social welfare and users’ surplus is, in general, ambiguous, but is certainly negative if low valuation users have a sufficiently homogeneous demand for Internet traffic.
File in questo prodotto:
File Dimensione Formato  
Pre-proofs.pdf

non disponibili

Descrizione: Articolo completo
Tipologia: Documento in Pre-print
Licenza: Copyright dell'editore
Dimensione 997.97 kB
Formato Adobe PDF
997.97 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
1-s2.0-S0167624519300046-main.pdf

non disponibili

Tipologia: Documento in Versione Editoriale
Licenza: Copyright dell'editore
Dimensione 1.02 MB
Formato Adobe PDF
1.02 MB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11586/258842
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 5
  • ???jsp.display-item.citation.isi??? 6
social impact