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Business Research

, Volume 3, Issue 1, pp 70–80 | Cite as

Tariff-Specific Preferences and Their Influence on Price Sensitivity

  • Agnieszka WolkEmail author
  • Bernd Skiera
Open Access
Article

Abstract

For many services, consumers can choose among a range of optional tariffs that differ in their access and usage prices. Recent studies indicate that tariff-specific preferences may lead consumers to choose a tariff that does not minimize their expected billing rate. This study analyzes how tariff-specific preferences influence the responsiveness of consumers’ usage and tariff choice to changes in price. We show that consumer heterogeneity in tariff-specific preferences leads to heterogeneity in their sensitivity to price changes. Specifically, consumers with tariff-specific preferences are less sensitive to price increases of their preferred tariff than other consumers. Our results provide an additional reason why firms should offer multiple tariffs rather than a uniform nonlinear pricing plan to extract maximum consumer surplus.

Keywords

pricing nonlinear pricing tariff choice tariff-specific preferences price elasticity flat rate three-part tariffs flat-rate bias pay-per-use bias 

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Copyright information

© The Author(s) 2010

Authors and Affiliations

  1. 1.Faculty of Business and EconomicsJohann Wolfgang Goethe UniversityFrankfurt am MainGermany

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