| Abstract: |
We present novel evidence from a large panel of UK consumers who receive
personalized reminders from a specialist price-comparison website about the
precise amount they could save by switching to their best-suited alternative
mobile telephony plan. We document three phenomena. First, even
self-registered consumers with positive savings exhibit inertia. Second, we
show that being informed about potential savings has a positive and
significant effect on switching. Third, controlling for savings, the effect of
incurring overage payments is significant and similar in magnitude to the
effect of savings: paying an amount that exceeds the recurrent monthly fee
weighs more on the switching decision than being informed that one can save
that same amount by switching to a less inclusive plan. We interpret this
asymmetric reaction on switching behavior as potential evidence of loss
aversion. In other words, when facing complex and recurrent tariff plan
choices, consumers care about savings but also seem to be willing to pay
upfront fees in order to get "peace of mind". |