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Pricing at the On-Ramp to the Internet

Pricing at the On-Ramp to the Internet

Price Indexes for ISPs during the 1990s

(p.197) 7 Pricing at the On-Ramp to the Internet
Hard-to-Measure Goods and Services
Greg StrangerShane Greenstein
University of Chicago Press

This chapter investigates the pricing behavior of Internet service providers (ISP) from 1993 to 1999 with the goal of generating price indexes. The results show that ISP pricing has been falling rapidly over time. The bulk of the price decline occurred between early 1995 and the spring of 1996. There was a 20 percent decline in price per unit of ISP quality for the thirty-three-month period between late 1996 and early 1999. Assessment of alternative models that varied in their attention to aspects of qualitative change showed that this attention matters. Accounting for qualitative change shapes the estimates of price declines and the recorded timing of those declines.

Keywords:   pricing behavior, Internet service provides, price index, price decline

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