A Behavioral economic interpretation of the preference for flat rates: The case of post-paid mobile phone services

Hitoshi Mitomo, Tokio Otsuka, Kiminori Nakaba

Research output: Chapter in Book/Report/Conference proceedingChapter

9 Citations (Scopus)

Abstract

This paper aims to empirically test the existence of a biased preference for flat rate service plans related to mobile phones, and to examine how psychological factors can affect such preferences. We define such preference as 'flat-rate preference'and interpret it in terms of behavioral economic concepts. Behavioral economics, in spite of its limitations in empirical analysis, provides deeper insights into human behavior than traditional economic models since it considers psychological factors within decision-making processes and allows for irrational choices by consumers. By applying several important concepts from behavioral economics, we seek to investigate a more reasonable explanation for mobile users' flat-rate preference. Loss aversion, reference dependence, the shape of probability weighting function, mental accounting, ambiguity aversion and cognitive dissonance are employed to examine such preference. Non-parametric methods are applied in the empirical analysis to data that was collected through an online survey in Japan. We successfully show the existence of the flat-rate preference in terms of loss aversion and reference dependence although we failed to identify the influences of the shape of the probability weighting function. The other three concepts could also be recognized as factors conducive to preference behaviors.

Original languageEnglish
Title of host publicationTelecommunication Markets
Subtitle of host publicationDrivers and Impediments
EditorsBrigitte Preissl, Peter Curwen, Justus Haucap
Pages59-73
Number of pages15
DOIs
Publication statusPublished - 2009 Dec 1

Publication series

NameContributions to Economics
ISSN (Print)1431-1933

ASJC Scopus subject areas

  • Economics and Econometrics

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    Mitomo, H., Otsuka, T., & Nakaba, K. (2009). A Behavioral economic interpretation of the preference for flat rates: The case of post-paid mobile phone services. In B. Preissl, P. Curwen, & J. Haucap (Eds.), Telecommunication Markets: Drivers and Impediments (pp. 59-73). (Contributions to Economics). https://doi.org/10.1007/978-3-7908-2082-9-4