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Consumers' Freedom of Choice: Lessons from the Cellular Market (Hebrew)

39 Pages Posted: 2 Jul 2009  

Adi Ayal

Bar-Ilan University - Faculty of Law

Date Written: June 29, 2009

Abstract

Consumers choosing a cellular calling plan typically have many options to choose from. While the number of firms may be small, each offers a large number of calling plans, each one dealing with many options for each of the different types of services included in the contract (voice communication, text messages, video and media offering, and more). The variety offered is usually seen as creating room for choice, something consumers value highly. In this paper we investigate the cognitive load induced by what may be called 'hyper-choice' conditions in the cellular market. Assessing all of the different options requires mental effort, and from a certain point most humans' ability to actually compare offerings - diminishes. We survey the psychological literature on cognitive overload, review experiments and empirical studies relevant to choice generally and the telecom market specifically, and apply them to current cellular markets. Is the large number of alternatives to consider actually detrimental to consumers? Overly large variety may serve as a way to confuse consumers and steer them towards options preferred by the offering firms, who are aware of cognitive biases and use them to construct optimal (for them) contracts. Competition between such firms suffers as a result - consumers' ability to compare among them is low, and their ability to tacitly collude increases. Two legal implications are discussed: consumer protection and antitrust law. (Note: Downloadable document is in Hebrew)

Keywords: cellular, cognitive overload, heuristics and biases, antitrust, consumer protection

JEL Classification: D1, D4, K2, L1, L4, L96

Suggested Citation

Ayal, Adi, Consumers' Freedom of Choice: Lessons from the Cellular Market (Hebrew) (June 29, 2009). Available at SSRN: https://ssrn.com/abstract=1427206 or http://dx.doi.org/10.2139/ssrn.1427206

Adi Ayal (Contact Author)

Bar-Ilan University - Faculty of Law ( email )

Faculty of Law
Ramat Gan, 52900
Israel

HOME PAGE: http://adiayal.blogspot.com

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