Complex Cell Phone Plans Dumbfound Economists, Too
Barry Nalebuff, economics professor at the Yale School of Management, told the New York Times, "The whole pricing thing is weird. You pay $60 to make your first phone call. Your next 1,000 minutes are free. Then the minute after that costs 35 cents." It's all clear as mud, right? Basically, phone companies want to squeeze as much money as they can out of each customer. Unfortunately, the need to keep investors happy can become more important than the consumer's best interest.
As it turns out, consumers often act in irrational ways, too. We all want instant gratification (or, in this case, instant savings), which isn't always beneficial when it comes to cell phone plans. For example, AT&T and Apple's old iPhone price point ($399 for the phone and $20-a-month for Internet) was actually cheaper in the long run than its newest one ($199 for the phone and $30-a-month for Internet). But many people didn't purchase the smartphone until it became "cheaper."
When neither consumer nor provider is behaving rationally, it's difficult for anybody, even an Ivy League economist, to unravel the these complex plans. What's the solution? Well, consumers must learn to think more long-term. Phone companies, meanwhile, must learn to simplify plans. [From: The New York Times]
Reader Comments (Page 1 of 1)
robert said 8:28AM on 11-17-2009
i want to know if it is possible for caleb johnson to report the news and leave his opinion out. I want to read the news and then use my brain to form an opinion. I don't need his opinion in order to digest information. If Caleb johnson wants to report his opinion that would be in the editorial section
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Jenny Milingtow said 7:16AM on 11-19-2009
I think this article makes a very valid point, the only draw a contract can have is for a smartphone and then you must want it badly to pay double for the phone and minutes. Personally I am happy to keep my very nice but not quite so smart phone for half the price. I have a Straight Talk phone with unlimited talk, texts and data for $45/month and the phone really is nice. I also get all the advantages of being on the best network because Straight Talk is part of Verizon's network nationwide.
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