behavioural economics @ the cma chris walters* director of economics, enforcement *the usual...
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Behavioural economics @ the CMA
Chris Walters*Director of Economics, Enforcement
*The usual disclaimer applies
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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
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ABOUT THE CMABehavioural economics @ the CMA
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Tools for making markets work well
CO
MP
ET
ITIO
N
TO
OL
SC
ON
SU
ME
R
TO
OL
S
Calls for information
Market studies
Super-complaints
MIRs
Unfair contract terms
Unfair commercial practices
Anti-competitive agreements
Abuse of dominance
Merger control
Competition advocacy
Business guidance
SOFT TOOLS
Impact
Strategic Significance Resource
Risk
Sector regulation
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When don’t markets work well?
Market concentratio
n
Barriers to entry
Supplier behaviour
Accessing information
Acting on information
Assessing information
Demand side blockages
Supply side blockages
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PUTTING BEHAVIOURAL ECONOMICS INTO PRACTICE
Behavioural economics @ the CMA
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BE and demand-side blockages
Accessing information
Acting on information
Assessing information
Narrow choice sets
Bounded rationality
Bounded self control
Bounded self interest
Anchors and heuristics
Habits and status quo
Impulsive behaviour
and procrast-ination
Sacrifice and punishment
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Business practices may exploit these
Accessing information
Acting on information
Assessing information
● 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)
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● Since mid-2010, c.45 investigations, increasing focus on BE theories of harm
Some examples
Pricing practices
● Drip pricing
- Low cost airlines (2012)
● Other pricing practices
- Supermarkets (2012)
- Furniture and carpet retailing (2014)
Other practices● Gyms (2013)
- Lengthy minimum membership periods
- Penalties, not liquidated damages
- Debt collection
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Supermarket pricing: Deal or no deal
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SOME FUTURE PRIORITIESBehavioural economics @ the CMA
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What next for BE @ CMA?●Online
intermediation
●Data as currency
●BE of businesses
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
180,000,000Total direct queries a
month, Duckduckgo.com
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Thank you
Chris WaltersDirector of Economics, Enforcement