Gain or Pain: Does Consumer Activity Reflect Utility Maximisation?
AbstractCompetition Authorities are introducing new informational remedies to help consumers search and switch more actively. Using a specially commissioned data set, and unique direct estimates of the gains, search and switching time which consumers anticipate, we examine the determinants of consumer activity in eight markets. We find that expected costs (and to some extent gains) do influence consumers as a utility maximising model would predict; but that their role is small, and other factors, particularly experience of switching in other markets, are also influential. We conclude that consumers’ confidence in their own estimates is crucial in encouraging market activity.
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Bibliographic InfoPaper provided by Centre for Competition Policy, University of East Anglia in its series Working Papers with number 08-15.
Length: 26 pages
Date of creation: Feb 2008
Date of revision:
consumer behaviour; search and switching; informational remedies;
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy
- L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-15 (All new papers)
- NEP-MIC-2008-04-15 (Microeconomics)
- NEP-MKT-2008-04-15 (Marketing)
- NEP-UPT-2008-04-15 (Utility Models & Prospect Theory)
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