Demise of the pay phone industry: assessing the welfare implications
Date
2003
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Haverford College. Department of Economics
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Award
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eng
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Open Access
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Abstract
Many times technological developments add to and improve what we already have, thereby increasing the welfare of society. There are also examples, both historic and present, where technological developments imply negative welfare consequences for at least some part of society. The relative size of that part differs from case to case, as does the relative harm in each situation. This paper outlines some of the historic examples of decreased welfare due to technological improvements, and discusses the concept in relation to the case of the disappearing pay phone, or public telephone. Pay phones have been in use since the late nineteenth century (Oslin, 1992). Inevitably with the invention of cellular phones, the demand for pay phones decreased. In turn, profits decreased, leading phone companies to eradicate millions of pay phones throughout the United States. Many people prefer to use pay phones, but this is becoming increasingly inconvenient and impractical. The second half of this paper presents an economic model that may be useful in evaluating these welfare consequences.