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Irrationality in Consumers’ Switching Decisions: When More Firms May Mean Less Benefit

Listed author(s):
  • Chris M. Wilson

    (University of East Anglia)

  • Catherine Waddams Price

    (University of East Anglia)

Registered author(s):

    We report evidence of three types of consumer switching decision errors within the UK electricity market. We identify consumers who do not switch despite substantial available savings, consumers who switch from a cheaper to a more expensive supplier and consumers who switch to a cheaper, but not the cheapest available supplier. Moreover, we find that consumers make more efficient decisions in markets with fewer competitors. This finding is consistent with theories of consumer confusion and “information-overload” rather than other “rational” explanations of consumer mistakes such as perceived differences in firm quality or uncertainty over consumers’ own demand.

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    Paper provided by EconWPA in its series Industrial Organization with number 0509010.

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    Length: 28 pages
    Date of creation: 20 Sep 2005
    Handle: RePEc:wpa:wuwpio:0509010
    Note: Type of Document - pdf; pages: 28
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