Gain or Pain: Does Consumer Activity Reflect Utility Maximisation?

CCP Working Paper No. 08-15

26 Pages Posted: 31 Mar 2008

See all articles by Yoonhee Tina Chang

Yoonhee Tina Chang

University of Bath - School of Management

Catherine Waddams Price

University of East Anglia (UEA) - School of Management

Date Written: February 2008

Abstract

Competition 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.

Keywords: consumer behaviour, search and switching, informational remedies

JEL Classification: D12, D83, L51, L88, L98

Suggested Citation

Chang, Yoonhee Tina and Price, Catherine Waddams, Gain or Pain: Does Consumer Activity Reflect Utility Maximisation? (February 2008). CCP Working Paper No. 08-15. Available at SSRN: https://ssrn.com/abstract=1114131 or http://dx.doi.org/10.2139/ssrn.1114131

Yoonhee Tina Chang

University of Bath - School of Management ( email )

Bath, Avon BA2 7AY
United Kingdom
+44 (0)1225 383744 (Phone)

HOME PAGE: http://people.bath.ac.uk/ytc23

Catherine Waddams Price (Contact Author)

University of East Anglia (UEA) - School of Management ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

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