The value of more accurate customer profitability reports: Does cost complexity matter?.

This paper reports experimental evidence on the potential benefits of reporting different levels of customer-related information in a pricing decision context. The paper mainly focuses on the influence of the complexity of the cost environment -measured by the degree of heterogeneity across customers- on the value of more accurate customer profitability systems. Contrary to the findings of Gupta & King (1997) our results indicate that the value of more accurate cost reports increases, as the cost environment becomes more complex. In addition we find that, compared to a situation where decision makers receive only general profit feedback, reports based on traditional costing systems improve the quality of the pricing decision only in a complex cost environment.Activity based costing; Complexity; Cost complexity; Decision; Decision making; Information; Price setting; Pricing; Profitability; Reporting; Systems; Value;

Are the dimensions of private information more multiple than expected? Information asymmetries in the market of supplementary private health insurance in England

Our study reexamines standard econometric approaches for the detection of information asymmetries on insurance markets. We claim that evidence based on a standard framework with 2 equations, which uses potential sources of information asymmetries, should stress the importance of heterogeneity in the parameters. We argue that conclusions derived from this methodology can be misleading if the estimated coefficients in such an `unused characteristics' framework are driven by different parts of the population. We show formally that an individual's expected risk from the perspective of insurance, conditioned on certain characteristics (which are not used for calculating the risk premium), can equal the population's expectation in risk { although such characteristics are both related to risk and insurance probability, which is usually interpreted as an indicator of information asymmetries. We provide empirical evidence on the existence of information asymmetries in the market for supplementary private health insurance in the UK. Overall, we found evidence for advantageous selection into the private risk pool; ie people with lower health risk tend to insure more. The main drivers of this phenomenon seem to be characteristics such as income and wealth. Nevertheless, we also found parameter heterogeneity to be relevant, leading to possible misinterpretation if the standard `unused characteristics' approach is applied

Time and Location Aware Mobile Data Pricing

Mobile users' correlated mobility and data consumption patterns often lead to severe cellular network congestion in peak hours and hot spots. This paper presents an optimal design of time and location aware mobile data pricing, which incentivizes users to smooth traffic and reduce network congestion. We derive the optimal pricing scheme through analyzing a two-stage decision process, where the operator determines the time and location aware prices by minimizing his total cost in Stage I, and each mobile user schedules his mobile traffic by maximizing his payoff (i.e., utility minus payment) in Stage II. We formulate the two-stage decision problem as a bilevel optimization problem, and propose a derivative-free algorithm to solve the problem for any increasing concave user utility functions. We further develop low complexity algorithms for the commonly used logarithmic and linear utility functions. The optimal pricing scheme ensures a win-win situation for the operator and users. Simulations show that the operator can reduce the cost by up to 97.52% in the logarithmic utility case and 98.70% in the linear utility case, and users can increase their payoff by up to 79.69% and 106.10% for the two types of utilities, respectively, comparing with a time and location independent pricing benchmark. Our study suggests that the operator should provide price discounts at less crowded time slots and locations, and the discounts need to be significant when the operator's cost of provisioning excessive traffic is high or users' willingness to delay traffic is low.Comment: This manuscript serves as the online technical report of the article accepted by IEEE Transactions on Mobile Computin

Some economic and social aspects of residential internet use in Australia

This study constructs a profile of the representative Australian residential Internet user from data obtained from a web-based survey. Survey data indicate the representative user is male, 20 to 40 years of age, highly educated, uses the Internet 8 hrs per week for e-mail and FTP, and has a monthly bill of AUD32. Anordered-logit model relates Internet use to price, sociodemographic and connection capacity variables. Model estimates show the probability of higher Internet use is greater for middle-income households, but declines with age of the user. Policy may be required to enhance access to lower-income groups, and to inform the elderly of the potential capabilities of the new technology. Further, model estimates suggest that Australian Internet subscribers prefer flat-rate pricing (or a combination of flat-rate and usagesensitive pricing) over usage-sensitive pricing schemes. This result is consistent with Australian consumer attitudes toward local telephone and mobile cellular pricing.Residential internet use in Australia, economic and social aspects

Using Experiments to Foster Innovation and Improve the Effectiveness of Energy Efficiency Programs

This paper argues that the establishment of a process designed to manage innovation must be developed in California to foster the creation of needed program improvements and develop new and more effective energy efficiency delivery programs. This paper discusses several key institutional problems that must be overcome to achieve significant progress

Self-assessment of driving style and the willingness to share personal information

The availability of better behavioral information about their customer portfolios holds the promise for different and more accurate pricing models for insurers. Changes in pricing, however, are always fraught with danger for insurers, as they enter long-term commitments with incomplete historical information. On the other hand, sharing personal information is still viewed with skepticism by consumers. Which type of personal information are consumers willing to share with insurers, and for what purpose? How would they like to be rewarded for this openness? For insurers, how will the transition shift their risk portfolios? This paper addresses these questions for auto insurance, particularly how the self-assessment of one’s driving style impacts this dynamic. In a survey of approximately 900 Swiss residents, we found that offering a compensation, especially premium discounts, but also services, significantly improves willingness to share information. Higher trust in insurance increases sharing. Women and younger people are more willing to share information. On the other hand, customers are less willing to disclose, to insurers, information not traditionally associated with insurance. The self-assessment of driving style also plays a significant role. More risk-averse driving styles are correlated with higher sharing. Conversely, riskier driving styles are correlated with lower sharing. This result is significant for insurers, as new data-driven pricing and services models should tend to attract less risky customer portfolios