Consumer inertia, choice dependence and learning from experience in a repeated decision problem

Miravete Marin, Eugenio and Palacios-Huerta, Ignacio (2014) Consumer inertia, choice dependence and learning from experience in a repeated decision problem. The Review of Economics and Statistics, 96 (3). pp. 524-537. ISSN 0034-6535

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Abstract

Understanding when and how individuals think about real-life problems is a central question in economics. This paper studies the role of inertia (inattention), state dependence and learning. The empirical setting is a tariff experiment, when optional measured tariffs for local telephone calls were introduced unanticipatedly. We find that consumers tend to align their choices of tariff and telephone usage levels correctly. Despite low potential savings, mistakes are not permanent as individuals actively engage in tariff switching in order to reduce the monthly cost of telephone services. Ignoring unobservable heterogeneity and the endogeneity of past choices would have reversed these results.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences > School of Economics
UEA Research Groups:	Faculty of Social Sciences > Research Groups > Industrial Economics Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Depositing User:	Pure Connector
Date Deposited:	22 Nov 2013 15:18
Last Modified:	04 Jul 2023 16:31
URI:	https://ueaeprints.uea.ac.uk/id/eprint/44738
DOI:	10.1162/REST_a_00386

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