The Effect of Shortening Lock-in Periods in Telecommunication Services

In this research note, we study the welfare implications of shortening the length of the lock-in period associated with triple play contracts using household level data, from a large telecommunications provider, for a period of 6 months. Using a multinomial logit model to explain consumer behavior we show that, in our setting, shortening the length of the lock-in period decreases the aggregated profit of the firms in the market more than it increases consumer surplus. This result arises because shortening the length of the lock-in period increases churn, and the costs to set up service for the consumers that churn and join a new carrier supersede the increase in the consumers’ willingness to pay for service when the length of the lock-in period shortens.

• 저널MIS Quarterly · 44(3) · 1391–1409
• 토픽ICT Impact and Policies · Media Technology
• DOI10.25300/misq/2020/14839
• 저자Baojiang Yang, Miguel Godhinho de Matos, Pedro Ferreira