Empirical evidence of consumer response in regulated markets

Waddams Price, Catherine and Zhu, Minyan (2016) Empirical evidence of consumer response in regulated markets. Journal of Competition Law and Economics, 12 (1). pp. 113-149. ISSN 1744-6414

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Abstract

The U.K. Competition and Markets Authority has opened two major investigations into the retail energy and banking sectors, and identifies weak consumer response as a potential theory of harm in both sectors. Consumers of many regulated services, including energy and banking, need to make active moves to switch suppliers, with profound consequences for how well the market functions. We identify differences in expected gains across demographic groups, particularly with respect to age and income, the associated changes in activity and implications for policy. We find that potential gains and anticipated switching time are associated with changes in consumer activity, but with differences between markets, demographic groups and individuals. Rather than concentrate on the average consumer response, we find variations across demographic groups, and that well informed vulnerable consumers are not necessarily less responsive than others, once we control for their expectations.We conclude that sector regulators and agencies who wish to encourage consumer action need to differentiate their policies: strategies to emphasize potential gains and reduce anticipated switching time are the most likely to increase consumer activity, but programs need to be tailored to particular markets and target groups if they are to be effective in stimulating consumer activity.

Item Type: Article
Additional Information: © The Author 2016. Published by Oxford University Press. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Depositing User: Pure Connector
Date Deposited: 17 Mar 2016 00:04
Last Modified: 22 Jul 2020 00:35
URI: https://ueaeprints.uea.ac.uk/id/eprint/57499
DOI: 10.1093/joclec/nhv041

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