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I don't get it, but I like it: Detailed pricing information increases confidence, but decreases quality of decision making

Author

Listed:
  • Ravi Dutta-Powell

    (Behavioural Insights Team)

  • Min-Taec Kim

    (Behavioural Insights Team)

  • Cameron Tan

    (Behavioural Insights Team)

Abstract

In collaboration with an energy regulator, we tested five versions of a potential Basic Plan Information Document (BPID) for energy plans in an incentivized online framed field experiment. Respondents were asked to view four hypothetical energy plans, and asked to select the cheapest plan for their family. We find that having detailed pricing information at the top of the document (instead of a price estimate) leads to fewer respondents selecting the cheapest plan for them. We also find that documents that do not include the detailed pricing information see lower confidence in decision making, even though almost 90% of respondents are unable to correctly interpret the detailed pricing information. In addition, 8-11% of respondents chose the plan with the highest discount, despite the plan being one of the most expensive plans overall. The results suggest there is significant scope for regulators to test the format of standardized disclosure documents to ensure they are effective.

Suggested Citation

  • Ravi Dutta-Powell & Min-Taec Kim & Cameron Tan, 2021. "I don't get it, but I like it: Detailed pricing information increases confidence, but decreases quality of decision making," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 5(1), pages 61-76, Septembre.
    • Handle: RePEc:beh:jbepv1:v:5:y:2021:i:1:p:61-76
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    consumer behavior; consumer protection; standardized disclosure; energy; electricity;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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