Bailout

The behavioral economics of data consumption

By Felix Salmon

I know that when you know how much electricity you’re using, you use less of it. But I always thought that was because the more electricity you use, the more you pay. In fact, it might just be a function of the fact that it’s being measured and reported back. I was puzzled by this story in today’s NYT:

Mr. de la Vega cited the heaviest data users, saying that 40 percent of AT&T?s data traffic came from just 3 percent of its smartphone customers.

But he emphasized that the company would first focus on educating consumers about their data consumption in the hope that doing so would encourage them to cut back, even though they are paying for unlimited data use.

Then I saw the WSJ explain:

Many customers don?t know how much bandwidth they?re consuming, Mr. de la Vega added. When AT&T conducted a broadband test, customers often reduced their data use.

I’m not entirely clear on what the mechanism is here: why would you reduce your consumption of something you’re getting an unlimited amount of for free, just because you’re told how much you’re using? The only thing I can think of is that some people are turning off wifi to preserve battery life, which means that they use the 3G network more, and when they find out how much they’re using 3G, they realize that they’d be better off turning wifi back on. But it doesn’t really matter why it works, if it works.

Full post as published by Macroprudential on December 10, 2009 (boomark / email).