Demand for Mobile Internet: Evidence from a Real-World Pricing Experiment", HECER Discussion Paper No

Mobile phones are increasingly used as a gateway to the Internet. The take-up of mobile phone-enabled Internet services was, however, initially slower than expected, at least in Europe. We estimate non-parametrically the price elasticities of demand for first-generation wireless services using (i) consumer-level panel data from a real world pricing experiment and (ii) the restrictions of a structural model. We decompose the number of wireless connections into the number of needs and the conditional probability of estab-lishing a connection, given a need. According to our estimates needs were plenty, but the conditional usage probability small. Demand for first-generation wireless services was highly elastic and the welfare gains to an (early) adopter moderate. Pricing and taxation of wireless services had a large suppressing effect on demand