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Helping Consumers Know Themselves

Author

Listed:
  • Emir Kamenica
  • Sendhil Mullainathan
  • Richard Thaler

Abstract

Firms sometimes know more about a consumer's expected usage than the consumer herself. We explore the consequences of this reversal in the information asymmetry. We analyze the consequences of making consumers more informed about themselves. While making consumers more informed decreases their expenditure conditional on a given set of prices, equilibrium prices may increase, offsetting the direct benefit of information. We discuss theoretical and practical issues surrounding so-called RECAP regulation that would require firms to provide each consumer with information about her own usage of the firm's product.

Suggested Citation

  • Emir Kamenica & Sendhil Mullainathan & Richard Thaler, 2011. "Helping Consumers Know Themselves," American Economic Review, American Economic Association, vol. 101(3), pages 417-422, May.
    • Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:417-22
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.417
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    References listed on IDEAS

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    1. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters, in: Victor J. Tremblay & Elizabeth Schroeder & Carol Horton Tremblay (ed.), Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74, Edward Elgar Publishing.
    2. Meglena Jeleva & Bertrand Villeneuve, 2004. "Insurance contracts with imprecise probabilities and adverse selection," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(4), pages 777-794, May.
    3. Stigler, George J., 2011. "Economics of Information," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 35-49.
    4. repec:dau:papers:123456789/5358 is not listed on IDEAS
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    Cited by:

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    2. Ran Spiegler, 2014. "Competitive Framing," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 35-58, August.
    3. Ran Spiegler, 2015. "On the Equilibrium Effects of Nudging," The Journal of Legal Studies, University of Chicago Press, vol. 44(2), pages 389-416.
    4. Takunori Ishihara & Takanori Ida, 2022. "The Effect of Information Provision on Stated and Revealed Preferences: A Field Experiment on the Choice of Power Tariffs Before and After Japanese Retail Electricity Liberalization," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(3), pages 573-599, July.
    5. Heidhues, Paul & Köszegi, Botond, 2018. "Behavioral Industrial Organization," CEPR Discussion Papers 12988, C.E.P.R. Discussion Papers.
    6. Florian Hoffmann & Roman Inderst & Marco Ottaviani, 2020. "Persuasion Through Selective Disclosure: Implications for Marketing, Campaigning, and Privacy Regulation," Management Science, INFORMS, vol. 66(11), pages 4958-4979, November.
    7. Bienenstock Sophie, 2018. "Utility Misperception in a Vertically Differentiated Duopoly," Review of Law & Economics, De Gruyter, vol. 14(3), pages 1-43, November.
    8. Griffin, Míde & Lyons, Sean & Mohan, Gretta & Joseph, Merin & Domhnaill, Ciarán Mac & Evans, John, 2022. "Intra-operator mobile plan switching: Evidence from linked survey and billing microdata," Telecommunications Policy, Elsevier, vol. 46(7).
    9. Meyer, Steffen & Urban, Linda & Ahlswede, Sophie, 2015. "Does a personalized feedback on investment success mitigate investment mistakes of private investors? Answers from large natural field experiment," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112988, Verein für Socialpolitik / German Economic Association.
    10. Schumacher, Heiner, 2014. "Incentives through consumer learning about tastes," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 170-177.
    11. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    12. Johannes Johnen, 2020. "Dynamic competition in deceptive markets," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 375-401, June.
    13. Laurie Buys & Desley Vine & Gerard Ledwich & John Bell & Kerrie Mengersen & Peter Morris & Jim Lewis, 2015. "A Framework for Understanding and Generating Integrated Solutions for Residential Peak Energy Demand," PLOS ONE, Public Library of Science, vol. 10(3), pages 1-20, March.
    14. repec:hal:pseose:halshs-00879205 is not listed on IDEAS
    15. Zibin Xu & Anthony Dukes, 2019. "Product Line Design Under Preference Uncertainty Using Aggregate Consumer Data," Marketing Science, INFORMS, vol. 38(4), pages 669-689, July.
    16. Wisnicki, Bartlomiej, 2022. "Consumer inertia fosters product quality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    17. Meyer, Steffen & Urban, Linda & Ahlswede, Sophie, 2016. "Does feedback on personal investment success help?," SAFE Working Paper Series 157, Leibniz Institute for Financial Research SAFE.

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