Do consumers switch to the best supplier?

Chris Wilson () and Catherine Waddams Price

Oxford Economic Papers, 2010, vol. 62, issue 4, 647-668

Abstract: This paper demonstrates that the ability of consumers to choose the best alternative supplier is 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 less than a half of the gains available. While such outcomes can be explained by high search costs, the observation that at least 17% of consumers actually reduced their surplus as a result of switching cannot. We rule out an explanation of incorrect demand prediction, and test for others including mis-selling. Copyright 2010 Oxford University Press 2010 All rights reserved, Oxford University Press.

Date: 2010
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Working Paper: Do Consumers Switch to the Best Supplier? (2007)
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