Are Consumers Myopic? Evidence from Handset and Mobile Services Choices. First version: December 2015 (Full paper)
This paper estimates a discrete choice model for combination of mobile tariffs and handsets using a cross-section of 16 743 subscribers of a European telecommunications carrier, observed between April 2011 and December 2014. The estimates are used to assess consumer’s myopia in an original set-up, namely the trade-off between current and future expenses individuals make when choosing a handset and a mobile plan. We show that, under assumptions underlying the econometric model, consumer myopia decreases significantly over time, along with the introduction and adoption of sim-only plans, and stabilizes around a value reasonably close to myopia estimated in other markets. This indicates that, on average, individuals tend to correctly trade-off current and future expenses when being offered suitable alternatives, in term of tariffs and handsets. We relate the emergence of these conditions to structural changes in the mobile market structure, leading to increased price competition and product differentiation.