1 / 8

Impact of Exclusive Handset Arrangements on Wireless Carriers: A Study of the iPhone

This study analyzes the welfare loss resulting from exclusive iPhone deals with AT&T, estimating a loss of $326 million. The analysis considers calling plans, utility, and customer preferences, questioning assumptions made in the model. It also explores the profitability of the exclusivity agreement and the impact on pricing and contracts.

laurielee
Download Presentation

Impact of Exclusive Handset Arrangements on Wireless Carriers: A Study of the iPhone

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. “Wireless Carriers’ Exclusive Handset Arrangements: An Empirical Look at the iPhone”Chintagunta, Liu, and Zhu Discussant: Yossi Spiegel NET Institute Conference Stern School of Business, NYU, April 20, 2012

  2. The main result • The fact that the iphone was offered exclusively by AT&T led to a welfare loss of $326M • The paper builds on the empirical methodology of Asker (2005) and Villas-Boas (2007) Chintagunta, Liu, and Zhu

  3. Comments – estimation • In reality there are many different calling plans – how is that taken into account? • What’s the price of a calling plan? • What’s the “utility” of a calling plan • This is important as it affects the demand estimation • Did all consumers choose a 2 year plan? Chintagunta, Liu, and Zhu

  4. Comments – estimation • The bundle iphone+Verizon did not exist – how do we know what the utility from that product would be? • How do we know the Verizon customers like the iphone as much as the AT&T customers? Suppose that many/most customers who like the iphone chose AT&T • The model assumes that utility is additive in the handset and the calling plan, but what if there’s interaction between handset and calling plans? Chintagunta, Liu, and Zhu

  5. Comments – analysis • Why did Apple and AT&T signed the exclusivity agreement? • Was it profitable for them? If the calculations do not show it then maybe there’s a problem with the estimates Chintagunta, Liu, and Zhu

  6. Comments – calling plans • In the counterfactual analysis, the assumption is that the price of calling stays the same even when Verizon offers the iphone – it’s highly likely that AT&T can charge higher prices when it offers the iphone exclusively Chintagunta, Liu, and Zhu

  7. Comments - contracts • The paper assumes that handset manufacturers charge a linear wholesale price • In reality we have bargaining and contracts are prob. nonlinear • Rey and Verge (JIE, 2010) show that with bargaining we have nonexistence of equil. or multiplicity of equil. • Bonnet and Dubois (RJE 2010) estimate a model with two-part tariffs Chintagunta, Liu, and Zhu

  8. Conclusion • The paper deals with an important and interesting problem • The setup for the counterfactual analysis is prob. very restrictive and does not take into account the recent theoretical literature on vertical relations Chintagunta, Liu, and Zhu

More Related