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Do Consumers Switch to the Best Supplier? by

By Chris M. Wilson and Catherine Waddams Price

Abstract

Abstract: This paper suggests that the ability of consumers to choose accurately between alternative suppliers is substantially limited even in a relatively simple and transparent market. Across two independent datasets from the UK electricity market we find, on aggregate, that those consumers switching exclusively for price reasons appropriated between a quarter and a half of the maximum gains available. While such outcomes can be explained by high search costs, the observation that at least a fifth of the consumers actually reduced their surplus as a result of switching cannot. We consider and reject several alternative explanations to pure decision error

Topics: Search Costs, Switching Costs, Decision Errors, Misselling. 1 Acknowledgements, We are very grateful to Michael Waterson for extensive and valuable
Year: 2013
OAI identifier: oai:CiteSeerX.psu:10.1.1.318.3975
Provided by: CiteSeerX
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