Consumer attitudes towards switching supplier in three deregulated markets

The efficiency of deregulated markets is jeopardized by consumers failing to switch supplier to the extent that would be beneficial to them. In order to disentangle the determinants of failures to switch, the present study investigates consumers’ motives for negative attitudes towards switching in the deregulated Swedish markets for electricity, landline telecom, and home insurance. Based on the results of a mail survey of a random sample of 458 household consumers, reliable measures were constructed of attitude towards switching supplier, loyalty to the incumbent, information search costs to compare suppliers, and expected economic benefits from switching. A negative attitude towards switching supplier was shown to increase with loyalty, increase with information search costs and decrease with expected economic benefits. Attitude towards switching was more negative in the electricity market than in the other markets and more negative in the landline telecom market than in the home insurance market. The differences between markets were accounted for by differences in loyalty, information search costs, and expected economic benefits.