Edited by Anastassios Gentzoglanis and Anders Henten
4. Behavioral economics and telecommunications policy Patrick Xavier and Dimitri Ypsilanti INTRODUCTION 4.1 Regulation in the telecommunications sector has focused mainly on the supply side of the market including, for example, market entry and licensing, access to and use of networks, interconnection, control over retail and/or wholesale pricing. This emphasis on the supply side has been appropriate because the task was to install effectively competing alternative suppliers in former monopoly telecommunication markets. As competition has developed in telecommunication markets and users have a wider choice of service providers, there has been increased attention by some regulators on the demand side. For instance, a demand-side measure introduced in many countries is the requirement for ‘number portability’ aimed at facilitating consumer ‘switching’ in the fixed line and mobile markets. Such attention to the consumer demand side is timely, because informed consumers prepared to choose between competing suppliers are necessary to stimulate firms to innovate, improve quality and compete in terms of prices. Indeed, in making well-informed choices between suppliers, consumers not only benefit from competition, but they exert the sustained pressure for providers to compete for their customer. Conversely, where consumers have too little information, poor-quality information, or misinformation, they may end up misled and confused by the choices on offer, may pay too much or may buy the wrong service. This may, in turn, inhibit and dampen the competitive process. Moreover, if suppliers can exploit consumers this could at some point lead to ‘reputational damage’ and disillusionment with the competitive process...
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