Helping Consumers Know Themselves
Emir Kamenica, Sendhil Mullainathan, Richard Thaler
American Economic Review · 2011 · Volume 101 · Issue 3
Abstract
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.
Keywords
Consumer Economics: Empirical Analysis, Consumer Protection, Asymmetric and Private Information, Economics of Regulation
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