Helping Consumers Know Themselves
AbstractFirms 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.
CitationKamenica, 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
- D12 Consumer Economics: Empirical Analysis
- D18 Consumer Protection
- D82 Asymmetric and Private Information
- L51 Economics of Regulation