Gain or Pain: Does Consumer Activity Reflect Utility Maximisation?
CCP Working Paper No. 08-15
26 Pages Posted: 31 Mar 2008
Date Written: February 2008
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: Suggested Citation