Are Consumers Myopic? Evidence from Handset and Mobile Services
In this paper, I estimate discrete choice models for handsets and mobile tariffs using a sample of 10,740 subscribers of a European mobile telecommunications operator, observed between April 2011 and December 2014. The estimates are used to measure consumer myopia, i.e. how they tradeoff current and future expenses when making their choices. I highlight differences across groups of consumers and, more importantly, over time. Indeed, I document a significant decrease in consumer myopia over the period I study, and show that this value seems to stabilize around a value close to what has been estimated in other markets. I argue that important changes in the market structure are the driving forces behind the decline of myopia, impacting prices and variety of tariffs available, as well as consumers’ awareness. I also argue that this situation benefited all consumers, not only those who selected a SIM-only tariff. Finally, I estimate a series of counterfactuals to assess the gain in consumer welfare that resulted from the changes observed in this market. For example, I show that the introduction of SIM-only tariffs increased the average consumer’s surplus by over 23€.