Estimation of Internet Demand by Iranian Urban Households

We apply  Almost Ideal Demand System (AIDS) to estimate internet demand by Iranian urban households. using the Seemingly Unrelated Regressions (SUR) method and pooled data of more than 130 thousands of Iranian urban households for the period 2008-2014. In order to increase robustness in estimation, we use provincial price indices and divide goods into 15 groups. The results show that the internet in Iran is a luxury (income elasticity of demand equals to 1.94) and an elastic (price elasticity of demand equals -1.5) service. Moreover, the results show that the internet is substitute with recreation, newspapers and other communication devices and is complement with telephone and education.