Low income consumers at most risk of disadvantage in complex communications markets
09 December 2010
New research into behavioural economics shows that low income consumers are more likely to suffer in complex communications markets because they are less likely to select the right products to suit their needs, the Consumer Panel says.
Consumer Panel Chair Anna Bradley said: “Regulators and policy makers must develop a more nuanced understanding of consumer behaviour. Regulatory and policy decisions must reflect the way consumers actually behave, rather than assuming that they behave in the way they're supposed to in economics text books. None of us behave 'rationally' the whole time; using perfect information to make flawless decisions.”
Giving an example of the importance of this approach, Anna Bradley said: “Often the regulatory response to a problem is to give consumers more information. But the evidence shows that when consumers are faced with decisions that involve too many options or too much information, they become less inclined to take action and more likely to make bad decisions. We need to take into account the real behaviour of different groups of consumers when designing regulation, otherwise there is a risk that consumers, particularly some of the most vulnerable groups, will not be properly protected.”
The Consumer Panel is now calling on regulators and policy makers to work harder to understand differences in behaviour for different groups of consumers, particularly vulnerable consumers, and to take proper account of how these behaviours affect consumer decision making in the high street. This emphasis on real consumer behaviour reflects the work being done by the Prime Minister's Nudge Unit, and should be rolled out across the communications sector.
Key messages
Regulators and policy makers must work harder to:
- understand consumer behaviour differences, particularly for vulnerable consumers.
- identify where different behaviours may cause vulnerable consumers disadvantage.
- adapt policies and interventions to respond to behaviour differences.
- be cautious about relying on information as a way of responding to consumer needs.
- provide less complex and confusing consumer information.