Consumer Decisions Under High Information Load: How Can Legal Rules Improve Search Behavior and Decision Quality?

Abstract

EU consumer protection legislation is designed to enable consumers to make "good" contract decisions in the market place. This legislation heavily relies on the model of rational homo oeconomicus: It assumes that consumers want to and can process large amounts of information in order to maximize their own outcomes, and requires businesses to provide a wealth of information to their customers. In an interdisciplinary study conducted by lawyers and psychologists, we wanted to describe the precise flaws of this strategy, based on the EU consumer protection regulation presently in force, and to formulate assumptions about promising regulatory means to overcome them.

We examined search behavior and decision strategies in a sample of 363 persons who we asked to choose a cellular service contract. Participants were presented with contract offers which reflected the demands of the law and which closely matched offers that can be found in the Austrian market. The multiple offers of 11 providers, with variation in rates and conditions, comprised each a large amount of detail and information. Hence, the choice situation was complex and information load was high. Two different user profiles were randomly assigned to the participants. Choice quality was measured on three levels (tariff quality, term quality, and subjective quality). We assessed the information processing behavior (including personal and contextual variables) with a palette of measures, identified discrete choice strategies, and examined how these related to choice quality. We found that most successful search strategies were not exhaustive, but instead involved the focused selection and processing of a medium amount of information. Successful decision behavior of that kind seems to be only partly and most imperfectly supported by present regulation. Research is now underway to explore a more "ergonomic" (i.e., psychologically realistic and effective) regulation of consumer information that may lead to a higher number ob "good" contract choices by cellular service customers.

Keywords: consumer decisions, decision behavior, information processing, consumer protection, EU regulation, cellular services, conclusion of contracts, cellular service markets

JEL Classification: K12, D12