Comments on: Game theory and pricing cell phone minutes

By: Lu-Tze

Lu-Tze — Wed, 11 Nov 2009 16:16:20 +0000

@ Presh
I recently came across your blog and have been totally hooked (thanks for that), therefore this comment on an old post. I don’t think the gasoline example is fair because the changing the habit of long drives means moving closer to work and involves selling/buying your house, therefore the threshold for the shift is very high. The original shift occurred over several years and was also influenced by desegregation, etc. Things that are easier to change (e.g. free pizza delivery) have in fact changed. Most pizza nowadays is NOT delivered free. For instance you can read here http://www.pizzamarketplace.com/article.php?id=4449&prc=126&page=107.

By: Pathik

Pathik — Sat, 26 Sep 2009 19:47:02 +0000

Nope. We have free incoming calls all over India. Only if you are roaming in a different circle do charges apply, and even they are nominal.

By: Eyal

Eyal — Fri, 25 Sep 2009 00:59:56 +0000

Sundeep, is it the case that receipients pay to receive calls in India? I know that it is true in the USA but it is untrue in Europe (in the half dozen countries that I’ve visited, at least). Can someone living in India please verify?

By: Presh Talwalkar

Presh Talwalkar — Thu, 24 Sep 2009 03:59:18 +0000

G. Pearson: Good question. My logic is that indulging is easier than curbing a habit. A few examples came to mind:

–Americans developed intricate schedules based on cheap gasoline. Long commutes, suburban sprawl, and free pizza delivery are some of its manifestations. When gasoline became $3-$4 a gallon a couple years ago, many found it hard to cut back on driving. So habits might be “sticky” in response to a price increase.

–My college used to have free printing in libraries. I got used to the luxury of printing out hundreds of pages. When that changed, I cut back a little on free printing but I eventually shelled out money as I was accustomed to paper copies.

That’s why I think duration free calls will reduce inhibition…so even if rates go up a bit, it will be hard for customers to switch back to pay per second–even if duration free calling costs a little bit more.

Of course, time will tell if Tata follows this strategy.

By: G. Pearson

G. Pearson — Wed, 23 Sep 2009 20:54:27 +0000

I was curious about your logic in stating that consumers would easily be swayed to change their habits in one direction (longer calls), but be resistant to changing them back. I can understand that a change in conditions could lead to a change in habits, but wouldn’t changing conditions again (or reverting) also cause a change in behavior correspondent to their ability to pay for more expensive calls?

Your belief that consumers would make longer calls if they were cheaper implies that they are now making shorter than desired calls to save money. If long calls got more expensive following a period of low prices, then wouldn’t the consumer curtail their calls in the same manner that they currently do?