Inattentive consumers in markets for services

Sitzia, Stefania and Zheng, Jiwei and Zizzo, Daniel John (2015) Inattentive consumers in markets for services. Theory and Decision, 79. pp. 302-332. ISSN 0040-5833

Abstract

In an experiment on markets for services, we find that consumers are likely to stick to default tariffs and achieve suboptimal outcomes. We find that inattention to the task of choosing a better tariff is likely to be a substantial problem in addition to any task and tariff complexity effect. The institutional setup on which we primarily model our experiment is the UK electricity and gas markets, and our conclusion is that the new measures by the UK regulator Ofgem to improve consumer outcomes are likely to be of limited impact.