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Is having an expert "friend" enough? An analysis of consumer switching behavior in mobile telephony

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  • Genakos, Christos
  • Roumanias, Costas
  • Valletti, Tommaso

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".

Suggested Citation

  • Genakos, Christos & Roumanias, Costas & Valletti, Tommaso, 2023. "Is having an expert "friend" enough? An analysis of consumer switching behavior in mobile telephony," LSE Research Online Documents on Economics 121294, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121294
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    More about this item

    Keywords

    tariff/plan choice; inertia; switching; loss aversion; mobile telephony;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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