Consumer Behavioural Biases in Competition

Sector: Abuse of dominance | Behavioural and experimental economics | Behavioural Economics | Competition | Competition Economics | Consumer and firm behaviour | Consumer behaviour and protection | International institutions | NGOs and consumer advocacy | Regulators and government
Client: N/A
Published: May, 2011
Document type: Report 
Tagged: experiments other international

Consumer behavioural biases imply that consumers may not behave in the fully rational way that many economic models assume. This study assesses what impact behavioural biases can have on competition, including, how competition and pricing practices may change when consumers are biased; if lowering barriers to entry can reduce inefficiencies that arise from consumer behavioural biases; situations where biased consumers make rational ones better or worse off;  and, the role of education and learning in mitigating biased behaviour.

The report considers the key implications for consumer and competition policy in particular to understand how and when competitive equilibrium may change for the worse. It also contributes to our understanding of when, why, and how governments should intervene.