Telecommunications Consumers: A Behavioural Economic Analysis

ESRI working papers represent un-refereed work-in-progress by researchers who are solely responsible for the content and any views expressed therein. Any comments on these papers will be welcome and should be sent to the author(s) by email. Papers may be downloaded for personal use only.

Authors: Pete Lunn

This paper makes the case that modern telecommunications markets present particular challenges for competition and consumer protection policy. The analysis initially identifies four specific properties, of which rapid technological change is just one, which in combination are unique to telecommunications. The result is that consumers face an environment that is likely to foment known decisionmaking biases identified by behavioural economics. This insight is employed to address two issues of concern to policymakers: the generally low levels of switching between providers and the apparent failure to select optimum tariffs. Evidence suggests considerable scope for consumer detriment in both cases. Various policy implications are discussed, including the need for targeted research to more accurately assess the extent of detriment and to increase understanding of the causes of consumer behaviour.