| The 1996 Telecommunications Act and a recent decrease in industry-wide costs have paved the way for many new entrants into long distance telephony. This situation has also provided a favorable environment for certain competitive behavior among small resale firms.; The first study finds new indication of price discrimination. An original, unusually detailed data set from a proprietary resale firm is used. This data set contains retail price, cost, and consumer characteristics for each and every phone call from over 180,000 customers. Zip Code census data are added to enhance demographic characterization. Price dispersion is analyzed in a heteroskedastic-consistent fixed effects model against subscriber demographics, while accounting for cost effects, time effects, and individual credit records. Results indicate that price variation is partially due to customer demographics (such as income, location, and race), and therefore imply third degree price discrimination.; The second study develops a model of subscriber switching behavior. Each individual subscriber's departure is used to predict the price differential necessary to lure subscribers away. Subscribers optimize each period as changes occur in both market-wide costs and market-wide prices. I develop an indexing method to account for the effects of price differentials among various sectors of the telephony market. The model also captures switching cost and quality preference heterogeneity among subscribers. Significant heterogeneity in each dimension is observed.; The third study accounts for tenure dependence and isolates its origin. The key challenge is in separating tenure effects from selection effects. This study utilizes an unusual amount of variation in the data and a dynamically updating selection process to appropriately differentiate between the two effects. Consumer reaction to time-varying relative prices is observed. The correctly estimated tenure effects with heterogeneity show a peak throughout months 21–44 of duration.; These explorations of resale firm activity provide insight that is useful for individual firm response, consumer action, and telecommunications market policy. |
