American Economic Review: Vol. 101 No. 3 (May 2011)


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Helping Consumers Know Themselves

Article Citation

Kamenica, Emir, Sendhil Mullainathan, and Richard Thaler. 2011. "Helping Consumers Know Themselves." American Economic Review, 101(3): 417-22.

DOI: 10.1257/aer.101.3.417


Firms sometimes know more about a consumer's expected usage than the consumer herself. We explore the consequences of this reversal in the information asymmetry. We analyze the consequences of making consumers more informed about themselves. While making consumers more informed decreases their expenditure conditional on a given set of prices, equilibrium prices may increase, offsetting the direct benefit of information. We discuss theoretical and practical issues surrounding so-called RECAP regulation that would require firms to provide each consumer with information about her own usage of the firm's product.

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Kamenica, Emir (U Chicago)
Mullainathan, Sendhil (Harvard U)
Thaler, Richard (U Chicago)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
D18: Consumer Protection
D82: Asymmetric and Private Information
L51: Economics of Regulation

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