‘The 10 x 8 Meter Relay: An assessment of how introducing comparative information may induce inter-group competition in energy efficiency’

The CCP Seminar Series continues on Friday 22nd January 2016, where we will be treated to a debut performance by the brilliant Mike Brock (CCP & ECO) who joined the Centre as a member in June 2015. Mike has been a Lecturer in Microeconomics at the UEA School of Economics since August 2014 and has numerous research interests, including specialist interest in the relationship between environmental assets and subjective well-being. His seminar will introduce his most recent project, ‘The 10 x 8 Meter Relay: An assessment of how introducing comparative information may induce inter-group competition in energy efficiency‘. An abstract for his seminar can be found below.

Abstract

This presentation will introduce a new natural field study currently underway at UEA. The project provides weekly information to students living in Halls of Residence on their absolute and relative energy usage.  Provided at an aggregated (flat-level) degree, the motivation for this study is to decipher how and to what extent non-financial stimuli can be used to try and incite behavioural change and invite participants to consider their empirical choices and actions. The study forms part of a wider literature which seeks to assess how and why consumers can be induced into making more conscious decisions and the necessary level of persuasion and reinforcement such methods require to achieve long-lasting success.

The seminar takes place from 13:00-14:00 in the Elizabeth Fry Building, Room 01.10. Tea will be provided directly afterwards in the Elizabeth Fry Staff Room.

‘You: The Problem in Energy Policy’

The Autumn Seminar Series continues on Friday 4th December with the delightful Elizabeth Errington (CCP and PPL) presenting ‘You: The Problem in Energy Policy‘. Liz is a PhD student in the School of Politics, Philosophy, Language and Communications Studies, where she researches a host of issues, including energy policy, consumers and affordability. An abstract for her presentation can be found below.

Abstract

The challenge of delivering affordable, sustainable and secure energy supplies continues to keep energy policy firmly on the agenda. However, despite consistent focus by practitioners and researchers the processes and results of the formulation of these policies still remains largely unknown.

Many factors ensure policy formulation generally and energy policy specifically is opaque. These include the multiple and interlinked roles of actors and policy venues, the role of an economic regulator and the activities of firms (with the associated need for commercial confidentiality). In addition to the complexity of the processes themselves, energy policy formulation is opaque due to these processes occurring largely ‘behind closed doors’.

This presentation will outline the research opportunities of using the way ‘problems’ are identified, conceptualized and represented to provide important insights into the opaque world of energy policy formulation. This will be illustrated using the initial findings from one year of a PhD study.

The findings so far? The problem is you.

The seminar will take place from 13:00-14:00 in Room 1.03 of the Thomas Paine Study Centre.

‘Collective Switching’

Our seminar series continues on Friday 12th June with the tremendous Catherine Waddams (CCP and NBS) presenting ‘Collective Switching‘. Catherine is a Professor of Regulation at the Norwich Business School. Her research interests lie in the area of Industrial Organisation, and she has published widely on privatisation, regulation and the introduction of competition into markets, particularly energy markets. An abstract for her presentation can be found below.

Abstract

We had the opportunity to observe over a hundred thousand ‘real’ switching decisions in the retail energy market by participants in The Big Switch collective switching exercise, organised by Which?, in 2012.  Our main initial findings are that:

1. The probability of switching rises with increases in the gains available;

2. Despite substantial gains available (median value around a tenth of the bill), and very little further effort required to switch, only a third of participants chose to change their supplier;

3.Participants who saw two offers were less likely to switch than those who saw only one.

We are particularly interested in understanding what lies behind this third finding.

The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.03.

This presentation is based on the results gathered by CCP during the Big Switch project, in conjunction with the Which? consumer group. You can download the full CCP report at the following link [PDF, 1.75MB].

‘False Advertising and Consumer Protection Policy’

The CCP seminar series continues on Friday 5th June and we are delighted to welcome back CCP alumnus Christopher Wilson (Loughborough University) who will be presenting ‘False Advertising and Consumer Protection Policy‘. Chris is a Senior Lecturer at the School of Business and Economics at Loughborough University. His research interests encompass industrial organisation and behavioural economics, with a particular interest in the interaction between consumer behaviour and firms’ pricing strategies. An abstract for his paper can be found below.

Abstract

There is widespread evidence that some firms use false advertising to overstate the value of their products. Using a model in which a regulator is able to punish false claims, we characterize a natural equilibrium in which false advertising occurs probabilistically and actively influences rational consumers. We solve for the optimal level of regulatory punishment under different welfare objectives and establish a set of demand and parameter conditions where optimal policy permits a positive level of false advertising. Further analysis considers wider issues, including the implications for industry self-regulation, product investment, and optimal policy across multiple heterogeneous markets.

The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.03.

Live comments from the CCP Summer Conference 2014 – Session 4

Session 4: Competition and the Demand-side:

Joe Farrell (University of California, Berkeley) (via video link) presented on the demand side of problem markets. The antitrust concerns which the study of competition tends to focus upon are supply side matters. According to Joseph Farrell, scholars assume that firms tend to behave under the assumption that customer is choosing the best deal but this may not be the case in problem markets. He describes the three mechanisms by which the demand side of markets may fail: Consumers who behave irrationally, Agency problems which “compound” customers, such as firms or government face, and problems consumers have observing or evaluating complex pricing or product characteristics. These problems may eliminate competition, or may merely funnel it towards different arenas. According to him, wary customers can undermine cross-elasticity by enabling bad deals to retain substantial share or discourage anyone from offering good deals.

Session 4 - Je Farrell

Geoffrey Myers and Katie Curry (Ofcom) explored Ofcom’s fundamental review of the problem market of non-geographic calls. Non-geographic calls include calls to mobile phones or to services with numbers beginning “08” or premium rate numbers beginning “09.” There is poor consumer awareness of the prices and externalities associated with calling these number different operators (for example, calling numbers from a mobile phone).

Telephone calls are a two-sided market, where the caller and the call recipient are on opposite sides of the market. For calls on landline, geographical numbers the recipient never pays. For non-geographic calls, either the caller or the recipient may pay the telephone provider. The caller and the recipient may buy phone services from different operators. This provides many advantages, such as allowing business to use a single, national number to access their services or in order to offer their customers a free service number. Premium rate numbers provide a means by which firms may offer a service.

Market failures in this market arise from three sources: a lack of consumer knowledge of the cost of calling numbers, the lack of concern of callers’ operators for the welfare of call recipients and their operator, and the misuse and degradation of certain number “brands” by callers’ operators and recipients. The harms caused by these factors include harm to firms using these number, to public service providers who wish to provide a free number but cannot and costs to vulnerable consumers who unknowingly overpay for calls.

To alleviate these problems, Ofcom has announced changes in the regulatory regime such as mandating free mobile phone and landline calls when calling “080” numbers and unbundling the price paid by the caller for calls to “084”, “087” and “09” numbers into an access charge, paid to the callers’ telecoms provider, and a service charge, passed on to the call recipient. This allows providers of public services to operate a free phone service to callers, and allows firms to communicate the price of their own service to consumers clearly. The improved visibility of the fee paid to the operator may encourage competition between operators. Consumers’ confidence in the fees associated with calling non-geographic numbers may increase over time, leading to these numbers becoming trusted brands.

Session 4 Ofcom

Live comments from the CCP Summer Conference 2014 – Session 1

Session 1: Introduction – What is a Problem Market?

Stephen Davies  (CCP, UEA) opened with some personal thoughts on clarifying “problem markets”. While no textbook definition exists, we know that certain markets generate a stream of work for competition authorities, despite any obvious contravention of competition or antitrust law. Could it be that these markets are “too hot to handle”? Stephen’s personal list of problem markets includes retail energy, supermarkets and healthcare. In more academic terms, the issues can be characterised in terms of tacit collusion, behavioural consumers, manipulation of thin markets, divergent incentives and public policy objectives.

CCP Session 1 Steve

Amelia Fletcher (CCP, UEA) explored the “gap” between competition and consumer law via two themes: the “gap” between core competition and consumer law, and the issue of potentially costly and ineffective ex ante remedial intervention which may have unintended consequences. While ex post standard competition law may be considered to address issues arising on the consumer side (in accessing, assessing and acting on relevant information), it deals less well with supply-side issues such as existing structural issues and market manipulation. Sectoral regulators and the CMA (via market investigations) are increasingly involved in this “gap”, with a current focus on search and switching costs and facilitating entry and expansion. However, there may be a need for further considerations, such as whether problems have been misdiagnosed and remedies poorly designed.

CCP Session 1 Amelia

 

Ashleye Gunn (Which?) Started by challenging the (pre-financial crisis) accepted wisdom that “markets always work” by calling for qualification of buzzwords such as “choice” (needs to be meaningful), “innovation” (needs to benefit consumers) and “information” (there is a need for clear and comparable pricing information). Which? uses two tests identify problem markets, and specifically the source and extent of ‘problems’ for consumers: whether the market is achieving its aims, and whether it is working for consumers as well as business. In particular, confusing pricing has been identified as central to problems because it can lead to consumers not driving competition. Which? campaigns therefore incorporate a range of different issues from ‘everyday frustrations’ to significant structural and cultural issues in major sectors. These campaigns involve not only traditional policy lobbying but also direct intervention in markets where consumers are at a disadvantage.

CCP Session 1 Ashleye

Catherine Waddams (CCP, UEA) introduced CCP’s collaboration with Which? on The Big Switch (TBS) by clarifying aspects of a well-functioning market and how energy may differ from this, for example by possible softening of some rivalry between companies. The study used probit analysis to identify the effects of multiple factors on switching decisions. Key results were that seeing two offers rather than one reduced the likelihood of switching by five percentage points, and that confidence was an important factor in determining activity.

CCP Session 1 Catherine

Live comments from the CCP Summer Conference 2014

Welcome to the Live Blog of the CCP Summer Conference 2014!

Over the next two days, you can follow CCP’s 10th anniversary conference on “Problem Markets” (ranging from energy to health) with session blogs by CCP’s economics, law and political science PhD researchers Khemla Armoogum, Elizabeth Errington, Mary Guy, Richard Havell and Liang Lu.

You can also follow us on Twitter using #ccp2014conf courtesy of David Reader.

After a brief introduction and warm welcome by CCP’s Director Morten Hviid, we will kick off at 9.45am on Thursday 12th June with Steve Davies, Amelia Fletcher, Ashleye Gunn and Catherine Waddams discussing “What is a problem market?”.

Over two days we will be covering aspects as diverse as the US and EU experience of managing problem markets, demand and supply-side issues and competition with divergent public policy concerns in markets ranging from energy to health.

Day 1 (Thursday 12th June) sees presentations by:

More to follow about Day 2!

In the meantime, we hope you will enjoy the conference and look forward to receiving your feedback!

 

CCP Conference speakers montage 2

‘The effects of asymmetric costs on cartel damages: The importance of the counterfactual’

The CCP seminar returns from its Easter break on Friday 2nd May and we are delighted to welcome Peter Møllgaard (Copenhagen Business School) to the Centre. Peter will be presenting his article entitled ‘The effects of asymmetric costs on cartel damages: The importance of the counterfactual‘ which he has written with his colleague at Copenhagen, Petter Berg. An earlier draft of the article can be found at this link, and an abstract for the paper can be found below.

Abstract

Cartel overcharges and the resultant damages and welfare losses are typically calculated by subtracting counterfactual prices from cartel prices. We determine both prices in a repeated game with cost asymmetries and product differentiation. Whereas cost asymmetries and product differentiation signifcantly affect counterfactual prices, they only have small effects on collusive prices. We find that over-charges and losses in consumer welfare increase with the degree of cost symmetry and substitutability of products. The case of symmetric costs and homogeneous products makes for the extreme case in which welfare losses are maximal and restitution of damages undercompensates consumers the most.

The seminar will take place from 13:00-14:00 in the Elizabeth Fry Building, Room 1.01.

‘Boycott. A stylised experiment on tax avoidance and empowered consumers’

The CCP seminar series continues on Friday 4th April with the ever-engaging Enrique Fatas (CCP and UEA School of Economics) presenting his research on ‘Boycott. A stylised experiment on tax avoidance and empowered consumers‘ which he has undertaken with Antonio J Morales (University of Malaga) and Axel Sontag (UEA). An abstract for their paper can be found below.

Abstract

We analyse consumer boycotts in a stylised experimental setting: firms post prices of an homogeneous product and consumers make shopping decisions. Relative to previous experimental studies of Bertrand games, this paper introduces three main changes: participants make decisions in both sides of the market; firms and consumer gets very limited information about the precise objective function of the other participants; and exchanges are taxed in a strongly asymmetric way, as firms may unilaterally refrain from paying taxes using a simple and private tax avoidance scheme. Tax avoidance automatically passes the burden of the unpaid taxes to the other agents. Boycotts are neither suggested nor mentioned in the description of the experimental game, but consumers may still unilaterally boycott firms. Boycotts come at a significant individual cost, and communication between consumers to coordinate the boycott is not permitted. Moreover, the experiment takes place in the usual private, anonymous and computerised environment. We manipulate both the level of competition in the market and the information consumers get about firms’ behaviour. Our results show that consumers boycotts are particularly difficult to sustain in this demanding setting. However, small boycotts go a long way, as firms significantly react to the signals sent by consumers, severely reducing tax avoidance.

The seminar will take place from 13:00-14:00 in the Thomas Paine Study Centre, Room 0.1.

‘The consumer attention deficit syndrome: Consumer choices in complex markets’

At this week’s CCP seminar, we are delighted to welcome two distinguished guests in the form of Lisbet Berg (SIFO) and Åse Gornitzka (University of Oslo). On Friday 14th March, Lisbet and Åse will be presenting their paper entitled ‘The consumer attention deficit syndrome: Consumer choices in complex markets‘. An abstract for their article can be found below and the full paper is available for download for subscribers to the Acta Sociologica journal.

Abstract

Consumers’ attention is a scarce resource. It is virtually impossible for a consumer to keep informed about all the markets he or she visits. This article describes a mechanism that is likely to evolve in sophisticated societies with multiple complex markets. Since the nature of consumer areas differs substantially and thus requires different kinds of consumer competences, such competences cannot be easily transferred from one consumer area to another. People therefore tend to give their limited attention to consumer areas of similar nature, while neglecting others.
This phenomenon is conceptualised as the Consumer Attention Deficit Syndrome (CADS). Empirically, if such a mechanism exists, this will be reflected in consumers’ tendency to develop specialised consumer competence profiles. In three nationally representative data sets collected in Norway in 2005, 2007 and 2009, specialised consumer competence profiles were distinguished. The following analysis indicates that, on an individual level, CADS is quite widespread. While it cannot be claimed that some social groups are more vulnerable to the syndrome than
others, different groups’ lack of attention is concentrated on different consumer areas. Leaning on choice and decision-making theories, the implications of CADS for the functioning of markets are discussed.

The seminar will take place from 13:00-14:00 in the Thomas Paine Study Centre, Room 0.1.