Steering Fallible Consumers

Paul Heidhues*, Mats Köster, Botond Koszegi

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    Abstract (may include machine translation)

    Online intermediaries with information about a consumer’s tendencies often ‘steer’ her toward products she is more likely to purchase. We analyse the welfare implications of this practice for ‘fallible’ consumers, who make statistical and strategic mistakes in evaluating offers. The welfare effects depend on the nature and quality of the intermediary’s information and on properties of the consumer’s mistakes. In particular, steering based on high-quality information about the consumer’s mistakes is typically harmful, sometimes extremely so. We argue that much real-life steering is of this type, raising the scope for a broader regulation of steering practices.
    Original languageEnglish
    Pages (from-to)1430-1465
    Number of pages36
    JournalEconomic Journal
    Volume133
    Issue number652
    Early online date7 Apr 2023
    DOIs
    StatePublished - 1 May 2023

    Fingerprint

    Dive into the research topics of 'Steering Fallible Consumers'. Together they form a unique fingerprint.

    Cite this