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The Economic Impact of Wireless Number Portability

May 2005
Working Paper
04-017
By  Minjung Park
This paper examines the price response of wireless carriers to the introduction of number portability. My main empirical finding is that wireless prices decreased in response to number portability, but not uniformly across all plans. Average prices for the plans with the fewest minutes decreased by only $0.5/month, but average prices for plans with intermediate and large numbers of minutes decreased by $3.3/month and $8.0/month, respectively. Resulting welfare gains to wireless consumers are large. This paper studies several explanations for the heterogeneous impact of number portability. My analysis suggests that wireless carriers engaged in price discrimination against consumer groups with high switching costs. The results of this paper suggest that even in fairly competitive markets, switching costs can confer considerable market power upon firms and firms can engage in price discrimination based on heterogeneous switching costs.