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Loss aversion and consumer inertia: new evidence from phone subscriptions

Across a range of everyday markets, consumers make recurrent tariff choices in the face of a multitude of fees and plans, leading to concerns they may fail to make optimal choices of suppliers or contracts. Christos Genakos, Costas Roumanias and Tommaso Valletti use data on approximately 60,000 mobile phone users in the UK to examine how people select their phone contracts. Even when provided with information that they could make savings by switching to an alternative plan, nearly two-thirds of customers do not act on this advice. People are most likely to change contract if they have incurred additional charges on top of their monthly plan, pointing to the role of loss aversion.

Christos Genakos, Costas Roumanias and Tommaso Valletti

21 July 2023

Vox EU

This work is published under POID and the CEP's Growth programme.

This publication comes under the following CEP theme: UK productivity and policy