Econometrica: Nov 1983, Volume 51, Issue 6

Price Elasticities for Local Telephone Calls<1699:PEFLTC>2.0.CO;2-R
p. 1699-1730

Bridger M. Mitchell, Bruce M. Wetzel, Rolla Edward Park

Price elasticities are estimated for local telephone calls and minutes of conversation using data from a pricing experiment in central Illinois conducted by General Telephone and Electronics. The experiment charges separately for calls and for minutes. Using a model that is consistent with the theory of telephone demand, the authors estimate the effects of both prices. The nonlinear generalized least squares estimates of the elasticities are fairly small--about 0.1 or less in absolute value at experimental price levels--but they are estimated with high precision. The report briefly considers the application of these results to predict the effects of introducing measured service telephone rates in other cities.

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