Interface between competition and consumers

1
Interface between competition and consumers

• Louise Sylvan
• Australian Competition and
• Consumer Commission

2
Victorian Consumer Affairs Council

• Professor Brunt served 10 years, 3 as chair
• Inquiry into Deceptive Trade Practices Law
• the deficiencies are so patently obvious that
  they can be quickly summarized and the relevant
  provisions of the Act dismissed A totally new
  legislative approach should be pursued.

3
Interface Competition and Consumers

• Generally complimentary policies
• Can be in conflict
• Competition policy concerned with supply side
  consumer policy concerned with demand side both
  consumer protection and consumer empowerment

4
Competition Consumer Interface

• Consumers not only benefit from competition,
  they activate it, and one of the purposes of
  consumer protection law is to ensure they are in
  a position to do so.
• Ron Bannerman

5
Economics for the Demand Side

• Outcomes for consumers in markets
• Consumer behaviour in markets
• Transaction costs (search and switching),
  information asymmetries
• Cognitive biases studied in behavioural
  economics

6
Over-confidence
90 of drivers believe and say they are better
than average drivers
7
Confirmation bias
With permission from Platinum Asset Management
8
Framing
Only 3 fat
97 fat free
9
Loss Aversion
LOSS 500!
Gain 500!
10
Heuristic simplification (rules of thumb)
Hmmm a 10 commission upfront on this product!
No point in this fine print planner disclosure
stuff. I can trust George he knew my father!
11
Decision paralysis Choice overload
Good lord how do you decide??!!
What a good range of choice!
12
Anchoring
2,000
1,500
NOW 1,295
NOW 1,295
13
Power of Defaults
14
Time Variant Preferences
Today I promise Ill pay it off when the credit
card bill arrives
One month later Well maybe Ill pay it off next
month
15
Behavioural Economics Policy Implications

• Market deregulation
• Importance of default bias
• Importance of enabling choice confusopoly
  problem
• Importance of endowment issues
• Financial sector markets
• Importance of contexts for decisions
• Importance of defaults
• Importance of hyperbolic discounting

16
Equilibrium with Naïve Consumers