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Behavioural economics @ the CMA

Behavioural economics @ the CMA. Chris Walters* Director of Economics, Enforcement *The usual disclaimer applies. Overview. About the CMA Making markets work well Putting behavioural economics into practice at the CMA Enforcing consumer law Looking at markets Some future priorities

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Behavioural economics @ the CMA

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  1. Behavioural economics @ the CMA Chris Walters*Director of Economics, Enforcement *The usual disclaimer applies

  2. Overview • About the CMA • Making markets work well • Putting behavioural economics into practice at the CMA • Enforcing consumer law • Looking at markets • Some future priorities • The interaction of competition and behavioural economic effects, especially online • The behavioural economics of personal data as currency • The behavioural economics of businesses, not consumers

  3. Behavioural economics @ the CMA About the cma

  4. Tools for making markets work well Anti-competitive agreements Abuse of dominance Merger control Calls for information Market studies Super-complaints MIRs Unfair contract terms Unfair commercial practices Impact CONSUMER TOOLS COMPETITION TOOLS Strategic Significance Risk Resource Competition advocacy Business guidance Sector regulation SOFT TOOLS

  5. When don’t markets work well? Demand side blockages Supply side blockages Accessing information Market concentration Assessing information Supplier behaviour Acting on information Barriers to entry

  6. Behavioural economics @ the CMA Putting behavioural economics into practice

  7. BE and demand-side blockages Bounded rationality Bounded self control Bounded self interest Accessing information Narrow choice sets Impulsive behaviour and procrast-ination Assessing information Anchors and heuristics Acting on information Habits and status quo Sacrifice and punishment

  8. Business practices may exploit these • Making information difficult to find • Increasing search costs • Obfuscating (e.g. partitioned or dripped pricing) • Making choice difficult • Surprise charges, automatic renewals and default charges • Time limited offers (e.g. bait pricing) Accessing information Assessing information Acting on information

  9. Some examples Pricing practices Other practices Gyms (2013) Lengthy minimum membership periods Penalties, not liquidated damages Debt collection • Since mid-2010, c.45 investigations, increasing focus on BE theories of harm • Drip pricing • Low cost airlines (2012) • Other pricing practices • Supermarkets (2012) • Furniture and carpet retailing (2014)

  10. Supermarket pricing: Deal or no deal

  11. Behavioural economics @ the CMA Some future priorities

  12. What next for BE @ CMA? • Online intermediation • Data as currency • BE of businesses

  13. Thank you Chris WaltersDirector of Economics, Enforcement

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