Brad DeLong links to this recent paper from Stanford and University of Chicago economists that attempts to determine the price elasticity of internet access by valuing the time people spend using it versus their wages, reasoning that the time spent internet constitutes an opportunity cost for high-wage earners. Here is the abstract:
For some goods, the main cost of buying the product is not the price but rather the time it takes to use them. Only about 0.2% of consumer spending in the U.S., for example, went for Internet access in 2004 yet time use data indicates that people spend around 10% of their entire leisure time going online. For such goods, estimating price elasticities with expenditure data can be difficult, and, therefore, estimated welfare gains highly uncertain. We show that for time-intensive goods like the Internet, a simple model in which both expenditure and time contribute to consumption can be used to estimate the consumer gains from a good using just the data on time use and the opportunity cost of people's time (i.e., the wage). The theory predicts that higher wage internet subscribers should spend less time online (for non-work reasons) and the degree to which that is true identifies the elasticity of demand. Based on expenditure and time use data and our elasticity estimate, we calculate that consumer surplus from the Internet may be around 2% of full-income, or several thousand dollars per user. This is an order of magnitude larger than what one obtains from a back-ofthe-envelope calculation using data from expenditures.
You can download the PDF of the whole report here.
The details are probably a little over my head, but without reading the paper yet, the bit about the eye-popping consumer surplus basically confirms what I've been thinking all along. I've been fortunate enough to have my parents pay for my internet access for my whole life, whether through the cable bill at home or footing the bill for my dorm room, but if they didn't, I'd be willing to shell out on the order of a few hundred bucks a month, if that's what it would take.
Posted by Zach 
