CHIBE Q&A with Dr. Christina Gravert

CHIBE will be welcoming Dr. Christina Gravert, Associate Professor of Economics at the University of Copenhagen, on November 26 at noon ET virtually for our seminar series.

Her topic is: “Can Attention Overcome Consumer Inertia? Experimental Evidence from a Liberalized Market.” Register for Dr. Gravert’s talk here.

Find a brief description of her talk below:

Consumers can save hundreds of dollars by switching to cheaper electricity plans, yet most don’t. Why? This talk explores what keeps people stuck with costly contracts, even in a market with low switching costs and large potential gains. Drawing on rich administrative data from Danish households, survey evidence, and a randomized experiment, I test whether better information and a switching broker can overcome consumer inertia. The findings reveal that attention to information, an often-suggested market friction, is not the main barrier to active choice. Instead, procrastination and distrust seem to play an important role. These insights reach beyond electricity market: similar frictions shape decisions in health insurance and other markets where “shopping around” could make a big difference. Understanding how to activate consumers can help design smarter policies that foster competition, lower prices, and improve welfare.

CHIBE spoke with Dr. Gravert ahead of her talk:

What are 1-2 takeaways you’d want people to come away with after your talk?

The first important takeaway is that I want people to think about when it makes sense to encourage people to actively choose and when a default might be the welfare-improving option. While theoretically freedom of choice is the preferred option for increasing competition and making sure that individuals receive a plan that fits with their needs, in practice, due to inertia, many people might end up in a worse situation than had they been allocated a default.

While I don’t buy into the promise of AI solving all our problems, I do think some smart machine learning could be very useful to design personalized, smart defaults.

The second takeaway is methodological. I find a huge gap in stated intentions to switch vs. actual switching for a topic which has limited social desirability bias. Several recent survey studies with information interventions extrapolate from the stated intentions to assumed behavior change. While most people would assume that there is a drop, I don’t think many assume that the drop would be this large. Hence, we need to be careful about assuming a change in beliefs will also change behavior.

Your talk discusses a study where procrastination and distrust, rather than lack of information, drive consumer inertia. What do you think could be done to counteract those forces?  

I can confidently say it’s not a good solution to send many reminders. My previous research shows that most people would quickly opt-out of reminders and this would create large annoyance costs for many consumers. I think my broker treatment shows that using a middleman can help to reduce procrastination and potentially also mistrust. However, given that it is a private company, some consumers were actually even less trusting of the solution.

Nevertheless, I think a solution where one can sign up to be switched into suitable contracts against a small fee could be the best option if one does not want to completely change the market structure. 

You conduct research in collaboration with public and private institutions within environmental sustainability. Do you have any advice for our researchers in terms of how to partner with external organizations? And do you see any themes in the type of help that these external organizations are looking for?

Most organizations do not have the necessary resources and skills to do large studies on human behavior. They find it interesting, especially when paired with behavioral economics insights, but they can’t do it themselves. Therefore, I also try to design collaborations that do not require much time involvement from the partner. I try to find situations where they might already be working on a project or initiative and then I try to design experiments that can be easily tied into their work.

In the past decade, since I started working with organizations, I also notice that there are more and more people with at least some behavioral economics knowledge in both companies and the public sector, which makes the topic and experimental approach easier to sell. We have come a long way from 2010.