An experiment for regulatory policy on broadband speed advertising

Shane Timmons (), Terence J. McElvaney and Pete Lunn
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Shane Timmons: Economic and Social Research Institute (ESRI), Dublin
Terence J. McElvaney: Economic and Social Research Institute (ESRI), Dublin

Journal of Behavioral Economics for Policy, 2019, vol. 3, issue 2, 17-24

Abstract: Identifying whether hyperbolic advertising claims influence consumers is important for consumer protection, but differentiating mere "puffery" from misleading advertising is not straightforward. We conducted a pre-registered, online experiment (N = 367) to determine whether pseudo-technical advertising claims about broadband speed bias consumer choice. We tested whether these claims lead consumers to (i) make suboptimal choices and (ii) choose faster, more expensive broadband packages than they otherwise would. We also tested a potential policy response, consisting of consumer information on broadband speeds and how they are advertised. One-in-five consumers chose a provider advertising "lightning fast" broadband over another offering the same speed at a cheaper price. Both pseudo-technical claims and standard puffery (e.g. "Best Deal!") led consumers seeking fast broadband to choose faster, more expensive packages than consumers who saw no such claims. The information intervention (i) decreased the proportion of suboptimal decisions, (ii) increased the likelihood that consumers switched package, and (iii) improved understanding of speed descriptions. The findings do not support tough regulation on product descriptions; alternative softer interventions may be more beneficial. The study also demonstrates how applied behavioural economics can provide bespoke evidence for regulatory policy.

Keywords: decision-making; behavioural economics; consumer protection; telecommunications (search for similar items in EconPapers)
JEL-codes: D12 D18 D83 D90 M37 M38 (search for similar items in EconPapers)
Date: 2019
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