Is having an expert “friend” enough? An analysis of consumer switching behavior in mobile telephony
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Published version
Author(s)
Genakos, Christos
Roumanias, Costas
Valletti, Tommaso
Type
Journal Article
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”.
Date Issued
2023-09-01
Date Acceptance
2023-07-07
Citation
Journal of Economic Behavior and Organization, 2023, 213, pp.359-372
ISSN
0167-2681
Publisher
Elsevier
Start Page
359
End Page
372
Journal / Book Title
Journal of Economic Behavior and Organization
Volume
213
Copyright Statement
© 2023 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license
(http://creativecommons.org/licenses/by/4.0/).
(http://creativecommons.org/licenses/by/4.0/).
License URL
Publication Status
Published
Date Publish Online
2023-08-02