Do consumers switch to the best supplier?

Chris M Wilson, Catherine Waddams Price

Research output: Contribution to journalArticle

90 Citations (Scopus)

Abstract

This paper demonstrates that the ability of consumers to choose the best alternative supplier is limited even in a relatively simple and transparent market. Across two independent datasets from the UK electricity market we find, on aggregate, that those consumers switching exclusively for price reasons appropriated less than a half of the gains available. While such outcomes can be explained by high search costs, the observation that at least 17% of consumers actually reduced their surplus as a result of switching cannot. We rule out an explanation of incorrect demand prediction, and test for others including mis-selling.
Original languageEnglish
Pages (from-to)647-668
Number of pages22
JournalOxford Economic Papers
Volume62
Issue number4
DOIs
Publication statusPublished - 1 Oct 2010

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