A.11 Consumer Surplus Calculations

In order to gain an understanding of the true value of a single telephone call for Grameen Bank members in terms of consumer surplus, we created a formula for equating the distance of a village from Dhaka with a conservative cost for travel to Dhaka from a village.

The best way to categorize the villages that we surveyed would be the following:

(1) Villages lying within 25 km of Dhaka city
(2) Villages lying between 25 to 50 km from Dhaka city
(3) Villages lying between 50 to 100 km from Dhaka city (that is, villages clustered around Comilla town)
(4) Villages lying beyond 100 km from Dhaka city (that is, villages clustered around Chittagong city)

The assumptions used to create our formula are as follows:

(a) The average number of hours required for a person to make a return trip to Dhaka city by public bus service and to make the necessary inquiry with a relative or business would be a minimum of 2 hours for category (1), a minimum of 3.5 hours for (2), a minimum of 6 hours for category (3) and a minimum of 16 hours for category (4). Here it is assumed that traffic conditions are normal, when in fact "normal" is more likely a high state of traffic congestion and unpredictable chaos. With "abnormal" traffic conditions, delays of up to an additional 50% (or even more) of the normal expected time have been observed; that is, a journey that normally takes 2 hours might take up to 3 hours in abnormal circumstances. For our purposes, we assume smooth traffic flow. Another point to take note of here is that a person making a round trip from category (4), that is, Chittagong area, to Dhaka will almost inevitably have to stay there overnight.

(b) In Bangladesh, people do not normally calculate labour time in terms of hourly wages - those are calculated only on a daily or monthly basis. The average daily wages or income in all the four categories of villages are normally between Tk. 80 to 120. It must be emphasized that in the context of Bangladesh, loss of even 1 or 2 hours of work, with a few exceptions where adjustments can be made, means the loss of the whole day's wages. We also do not factor in any real or in-kind costs for childcare or replacement labour for food acquisition/preparation. Therefore we conservatively estimate that a trip to Dhaka for one day is worth Tk. 80 for one day’s labour value. Thus for categories (1), (2) and (3), we cost each round trip visit to Dhaka as Tk. 80.

(c) For each person, the average return trip fare to Dhaka by public bus service and the estimated transport cost within Dhaka city are around Tk. 70 for category (1), Tk. 90 for category (2), Tk. 140 for category (3), and Tk. 280 for category (4). However, for category (4) people, an overnight stay in Dhaka city is almost inevitable. Roughly 25% of the people are expected to stay at their relatives' houses, while the others must find a hotel room. The cheapest daily hotel room rent per person in Dhaka city is around Tk 50.

(d) The charges for a 3-minute telephone call to Dhaka city are Tk. 18 (Tk 6 x 3) from categories (1) and (2), and Tk. 75 (Tk 25 x 3) from categories (3) and (4).

A Calculations for Category (1) Villages lying within 25 km of Dhaka city

Consumer surplus = Cost of wages + cost of travel – cost of 3 minute call to Dhaka

Consumer surplus as a percentage of monthly household income = Consumer surplus/mean monthly household income

Consumer surplus = 2 hours round trip travel plus time in Dhaka (Tk. 80 wages) + transport cost (Tk. 70) = Tk. 150 – Tk. 18 = Tk. 132 ($2.70 USD)

Consumer surplus as a percentage of mean monthly household income = Tk 132/5000 = 2.64%

Cost of trip is 7.33 times the cost of the phone call (132/18)

B Calculations for Category (2) Villages lying between 25 to 50 km from Dhaka city

Consumer surplus = 3.5 hours round trip travel plus time in Dhaka (Tk. 80 wages) + transport cost (Tk. 90) = Tk. 170 – Tk. 18 = Tk. 152 ($3.10 USD)

Consumer surplus as a percentage of mean monthly household income = Tk 152/5000 = 3%

Cost of trip is 8.44 times the cost of the phone call (152/18)

C Calculations for Category (3) Villages lying between 50 to 100 km from Dhaka city (that is, villages clustered around Comilla town)

Consumer surplus = 6 hours round trip travel plus time in Dhaka (Tk. 80 wages) + transport cost (Tk. 140) = Tk. 220 – Tk. 75 = Tk. 145 ($2.96 USD)

Consumer surplus as a percentage of mean monthly household income = Tk145/5000 = 2.9%

Cost of trip is 1.93 times the cost of the phone call (145/75)

D Calculations for Category (4) Villages lying beyond 100 km from Dhaka city (that is, villages clustered around Chittagong city)

Consumer surplus = 16 hours round trip plus time in Dhaka overnight (Tk. 160) + accommodation (Tk. 50) + transport cost (Tk. 280) – Tk. 75 = Tk. 490 ($10 USD)

Consumer surplus as a percentage of mean monthly household income = Tk 490/5000 = 9.8%

Cost of trip is 6.53 times the cost of the phone call (490/75)

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