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Inattentive consumers in markets for services

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  • Stefania Sitzia
  • Jiwei Zheng
  • Daniel Zizzo

Abstract

In an experiment on markets for services, we find that consumers are likely to stick to default tariffs and achieve suboptimal outcomes. We find that inattention to the task of choosing a better tariff is likely to be a substantial problem in addition to any task and tariff complexity effect. The institutional setup on which we primarily model our experiment is the UK electricity and gas markets, and our conclusion is that the new measures by the UK regulator Ofgem to improve consumer outcomes are likely to be of limited impact. Copyright The Author(s) 2015

Suggested Citation

  • Stefania Sitzia & Jiwei Zheng & Daniel Zizzo, 2015. "Inattentive consumers in markets for services," Theory and Decision, Springer, vol. 79(2), pages 307-332, September.
    • Handle: RePEc:kap:theord:v:79:y:2015:i:2:p:307-332
    DOI: 10.1007/s11238-014-9466-8
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    5. Johannes Becker & Jonas Fooken & Melanie Steinhoff, 2019. "Behavioral Effects of Withholding Taxes on Labor Supply," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(4), pages 1417-1440, October.
    6. Esplin, Ryan & Davis, Ben & Rai, Alan & Nelson, Tim, 2020. "The impacts of price regulation on price dispersion in Australia's retail electricity markets," Energy Policy, Elsevier, vol. 147(C).
    7. Peter D. Lunn & Marek Bohacek, 2017. "Price transparency in residential electricity: Experiments for regulatory policy," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 1(2), pages 31-37, September.
    8. Xue, Lian & Sitzia, Stefania & Turocy, Theodore L., 2017. "Mathematics self-confidence and the “prepayment effect” in riskless choices," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 239-250.
    9. Esplin, Ryan & Best, Rohan & Scranton, Jessica & Chai, Andreas, 2022. "Who pays the loyalty tax? The relationship between socioeconomic status and switching in Australia's retail electricity markets," Energy Policy, Elsevier, vol. 164(C).
    10. García-Mariñoso, Begoña & Suárez, David, 2019. "Switching mobile operators: Evidence about consumers’ behavior from a longitudinal survey," Telecommunications Policy, Elsevier, vol. 43(5), pages 426-433.
    11. Wisnicki, Bartlomiej, 2022. "Consumer inertia fosters product quality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    12. McGowan, Féidhlim & Papadopoulos, Alexandros & Lunn, Pete, 2023. "Who switches and why? A diagnostic survey of retail financial services in Ireland," Papers WP748, Economic and Social Research Institute (ESRI).
    13. Sonntag, Axel & Zizzo, Daniel John, 2017. "Accountability one step removed," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168235, Verein für Socialpolitik / German Economic Association.
    14. Ravi Dutta-Powell & Min-Taec Kim & Cameron Tan, 2021. "I don't get it, but I like it: Detailed pricing information increases confidence, but decreases quality of decision making," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 5(1), pages 61-76, Septembre.
    15. Astrid Gamba & Anna Bottasso, 2019. "Consumer inertia in energy markets: Insights from behavioral economics," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2019(3), pages 113-130.
    16. Xiaoping He & David Reiner, 2017. "Why Consumers Switch Energy Suppliers: The Role of Individual Attitudes," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    17. Timo Henckel & Gordon Menzies & Peter Moffat & Daniel J. Zizzo, 2017. "Sticky Belief Adjustment: A Double Hurdle Model and Experimental Evidence," Working Paper Series 40, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    18. Lana Friesen & Peter E. Earl, 2020. "An Experimental Analysis of Regulatory Interventions for Complex Pricing," Southern Economic Journal, John Wiley & Sons, vol. 86(3), pages 1241-1266, January.
    19. Clement A. Tisdell, 2018. "Diversity In Economic Decision-Making And Behaviour: A New Brief Review," Advances in Decision Sciences, Asia University, Taiwan, vol. 22(1), pages 351-368, December.

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