Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet
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ARTICLE SUMMARY
This paper estimates how much consumers value Internet access by considering how much time they spend using it.
POLICY RELEVANCE
Policy studies that do not consider the time cost of the Internet will underestimate the value of Internet access to consumers.
KEY TAKEAWAYS
- In addition to the cost of computing equipment and an Internet service provider subscription, using the Internet costs consumers time.
- Economists have techniques for estimating how much consumers value their time, and so the authors are able to estimate the full cost of the Internet to the average user.
- The authors are also able to estimate how much consumers would be willing to pay for Internet access.
- The difference between how much a consumer would be willing to pay for the Internet, and how much he or she must actually pay, is the consumer's surplus from Internet access.
- A typical consumer enjoys a surplus of $3000 from Internet access.
- Conventional estimates that fail to take into account the time cost of the Internet would show a surplus of less than $100.
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About Austan Goolsbee
Austan D. Goolsbee studies the Internet, the new economy, government policy, and taxes.
He recently returned from Washington where he was the Chairman of the Council of Economic Advisers and a member of the President's cabinet. Before Washington, his research earned him recognition as a Fulbright Scholar and a Sloan fellow. In previous years, he was named one of the Global Leaders for Tomorrow by the World Economic Forum, one of the six "Gurus of the Future" by the Financial Times and one of the "40 under 40" by Crain's Chicago Business.
