Do Consumers Switch to the Best Supplier?

Chris Wilson and Catherine Waddams Price
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Chris Wilson: Department of Economics, University of Oxford
Catherine Waddams Price: Centre for Competition Policy and Norwich Business School, University of East Anglia

No 2007-06, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: This paper suggests that the ability of consumers to choose accurately between alternative suppliers is substantially limited even in a relatively simple and transparent market. Across two independent datasets from the UK electricity market we find, on aggregate, that those consumers switching exclusively for price reasons appropriated between a quarter and a half of the maximum gains available. While such outcomes can be explained by high search costs, the observation that at least a fifth of the consumers actually reduced their surplus as a result of switching cannot. We consider and reject several alternative explanations to pure decision error.

Keywords: Search Costs; Switching Costs; Decision Errors; Mis-selling. (search for similar items in EconPapers)
JEL-codes: D83 L00 (search for similar items in EconPapers)
Date: 2007-07-01
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2007_06

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