Do telecommunications prices depend on consumer engagement?

Keywords Telecommunications; Consumer engagement; Retention offers; Behavior-based price discrimination Highlights * Telecommunications operators use behavior-base price discrimination strategies. * We analyze the effects of consumer engagement on prices in the Spanish telecommunications market. * Engaged consumers pay 9.4% less than unengaged consumers for their services. * The excess price paid by unengaged consumers increases as they contract premium television content. * The elderly are the more likely to be unengaged. Abstract This paper analyzes how customers' heterogeneous search and switching habits affect the prices paid for telecommunication services in a context in which operators use price discrimination strategies to retain their customers and attract those of their rivals. Drawing on a representative sample of Spanish households (N=3,113), we show that engaged consumers pay 9.4% less than completely unengaged consumers for their telecommunication services, after controlling for the characteristics of the bundle of services contracted. We also find that highly engaged consumers (i.e. those that have called their operator to obtain a better deal and who have switched to a different operator at least once) pay 13.6% less for their services than unengaged consumers, that consumers who have switched operator at least once pay 8.4% less, and that consumers who call their operator to request better conditions for their contracts pay 5.8% less. Finally, we show that the excess price paid by unengaged consumers increases as they contract more sophisticated services, such as premium television content and additional mobile lines. Author Affiliation: (a) Departament d'Economia and BEAT, Universitat de Barcelona, Spain (b) Department of Statistics and Knowledge Management, Comisión Nacional de los Mercados y la Competencia, Spain * Corresponding author. Article History: Received 25 March 2022; Revised 25 December 2022; Accepted 5 January 2023 (footnote) The opinions and analysis that appear in this paper are responsibility of the authors only and do not necessarily represent those of the CNMC. Joan Calzada acknowledges financial support from the Spanish Ministry of Science, Innovation and Universities (grant PID2021-128237OB-I00). Byline: Joan Calzada [calzada@ub.edu] (a,*), Begoña García-Mariñoso (b), David Suárez (b)