Consumer Inaction Traps

Abstract

This dissertation proposes and tests a theory of consumer inaction traps – situations where consumers repeatedly fail to take actions to address relatively small problems, and end up suffering disproportionately from these problems as a result. I demonstrate that initially forgoing action leads to a trap where subsequent opportunities to address a problem are not taken because they are relatively less attractive than opportunities that were previously foregone. I show that this trap can be avoided by removing the opportunity for initial inaction, by eliminating the consumer’s responsibility for the initial inaction, or by decoupling the current opportunity to address the problem from previous opportunities. Specific examples of these inaction traps are examined using incentive compatible experiments in the domains of product malfunctions (Essay 1) and declining investments (Essay 2). Experimental manipulations are used to both pinpoint the mechanism underlying these effects, and identify potential interventions to reduce or eliminate the impact of these traps.