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Estimating demand for local telephone service with asymmetric information and optional calling plans

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We study the theoretical and econometric implications of agents' uncertainty about their future consumption when a monopolist offers them either a unique, mandatory nonlinear tariff, or a choice in advance among a menu of optional nonlinear schedules. In this model, agents' uncertainty is resolved through individual and privately known shocks on their types. In such a situation the principal may screen agents according to their ex-ante or ex-post type, by offering either a menu of optional tariffs or a standard nonlinear schedule. The theoretical implications of the model are used to evaluate the tariff experiment run by South Central Bell in two cities of kentucky in 1986. The empirical approach explicitly accounts for the existence of informational asymmetries between local telephone users and the regulated monopolist, leading to different, nested, econometric specifications under symmetric and asymmetric information

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp1997/97-43.pdf

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Copyright INSEAD. All rights reserved