Inattentive Consumers in Markets of Services

The experimental instructions and details on all tariff tasks are in an online appendix. In February 2011, we collected all the electricity and gas tariffs available in the UK market as available to a London consumer using the “Which?” website. The tariffs ranged from simple ones with one tier (i.e., a single marginal price) to more complicated ones with two tiers and a ceiling (i.e. a marginal price and, once consumption exceeds a ceiling, a second and lower marginal prices) or a standing charge and one tier (i.e. a fixed price plus a single marginal price). The tariffs in our experiment were partly real tariffs collected in this way and partly derived (i.e. created) by us using the same structure as the real ones (derived tariffs in what follows). The process of selection and derivation of all tariffs, as well as the full list, is described in detail in an online appendix. We employed 144 tariffs. Two thirds of the tariffs were real and one third was derived. The real tariffs were half for a single service (these are electricity tariffs) and the other half were dual tariffs (both gas and electricity). The derived tariffs were all dual ones. Subjects were only told that the tariffs related either to one good or to two goods (labeled as good A and good Baseline). Table 1 shows a sample of tariffs used. The difference between the best tariff and the second best tariff was always at least 3 pounds. (Insert Table 1 about here.) The default tariff. The default tariff was always a derived tariff designed in such a way that it was never the best to maximize earnings. The difference between the default tariff and the best tariff was usually at least around 6 pounds. Nature of the tariffs employed in each task. The order of the 36 tasks was randomized. • Number of tariffs. Half of the tasks employed 4 tariffs and the other half 24. • Complexity of tariffs. 1/3 of the tasks only involved single real tariffs, 1/3 of the tasks only employed dual real tariffs and 1/3 of the tasks only employed dual derived tariffs. • Mix of tariffs. ¼ of the tasks only employed simple tariffs (both single and dual tariffs with only one tier); ¼ of the tasks involved only complex tariffs (both single and dual ones with either two tiers or one tier and standing charge); the rest involved a mix of both simple and complex tariffs (half of each). 3. The Experimental Treatments Treatment Baseline (30 subjects). This treatment had a default tariff and a search engine. In each task subjects were shown the default tariff in a first screen; from this screen subjects could either stick to the default tariff or go to a second screen where they could see all the tariffs involved with the default tariff highlighted (see Figure 1 and Figure 2). For each task, if subjects did not make a choice within two minutes, they were assigned the default tariff. When deciding the tariff to select, subjects could use a search engine, which was a stylized version of internet search engines: subjects had to provide the default tariff details and a consumption level; the search engine would then give the entire list of tariffs with the difference in earnings relative to the default tariff. (Insert Figure 1 and 2 about here.) Treatment Web (alternative internet task – 30 subjects. This treatment involves two different tasks displayed in two different screens. In one computer screen subjects had the tariff task implemented as in the baseline treatment. In another screen they could browse the web but were not paid for that, in fact only the tariff task was incentivized. If in any given period they did not make any active choice in the tariff task within two minutes, the default tariff was selected for them; they were then required to select their consumption level. Treatment Grid (alternative counting task - 50 subjects). In this treatment, subjects again had two screens in front of them. In one they could perform the tariff tasks. In the other, they could perform a counting task consisting in counting the 1s in 0-1 grids (see Figure 3). This is a task deemed unpleasant enough in the real effort literature (as in Abeler et al., 2011) as to be considered a good measure of real effort. In our experiment, and as made clear in the instructions, it was also entirely unincentivized, which means that subjects should have ignored the task and focused entirely on the tariff tasks, on which their earnings depended exclusively. By comparing performance in the Web and the Grid treatment, we can verify whether the nature of the alternative task matters for our results. (Insert Figure3 about here.) Treatment Salient (alternative salient counting task – 50 subjects). This is the key treatment of our experiment. We employed the same counting task as in Grid, but the grid was now placed on the first screen of each task (see Figure 4). On the same screen subjects also saw the default tariff and so, if they wished, they could choose this tariff in this screen and move straight to the consumption page. Alternatively they could opt to see all the tariffs involved in the task and select the tariff of their choice as usual.

Participants were recruited from a pool of subjects. The pool is created through online recruitment and when individuals sign up, they agree to be taken into consideration for participation in our economic experiment.