Smart Data Pricing: The Value of Shared Data Plans

This paper studies a monopoly telecom operator’s decision on the adoption of shared data plans. A shared data plan allows sharing data quota among multiple devices or users, while conventional single device data plans only allow the use of a single device. We develop analytical models and compare a simple shared data plan (i.e., bundling pricing) to single device data plans (i.e., partitioned pricing). We aim to identify key factors that drive the optimal pricing policies under the two pricing plans and the value of data shared plans. We first consider a base model with independent consumer valuations (usages) of different devices. We find a threshold on the unit usage cost below which the shared data plan yields more profits than single device data plans. The optimal price for the shared data plan is less than the sum of the single device data plans. The disparity of the devices’ mean usages reduces the relative value of the shared data plan against the single device data plans. We also show that shared data plans increases the social welfare and consumer surplus when it yields a higher profit. We then examine the effects of complementarity and substitution between consumer valua