An Experimental Analysis of Regulatory Interventions for Complex Pricing

Considerable evidence demonstrates that consumers make poor choices when facing complex multidimensional pricing schemes. The problem is clear but appropriate regulatory interventions less so. We study the efficacy of five different interventions to improve consumer decision making in an experimental context where subjects choose among a set of predefined phone plans involving nonlinear tariffs. We compare two types of intervention: information provision and consumer literacy training. We find that training about plan costs significantly improves decision quality, while providing information about plan value assists inexperienced decision makers, and visual feedback helps experienced decision makers. Implications for policy are discussed, mindful of heterogeneous consumer literacy and the infrequency with which consumers are actually “in the market” for a better phone service plan.