Consumers are being asked to make financial and lifestyle decisions of staggering complexity—pension plans, insurance policies, phone tariffs—often without the tools to judge them well. This research programme, led by a network of behavioural scientists at Nottingham, East Anglia, and Warwick, aims to understand exactly why people struggle with such choices and how firms design those choices to exploit predictable biases. The problem is that decades of behavioural science show that even simple decisions trip people up, and the consequences—poor savings, bad insurance, unaffordable debt—hurt both individuals and the wider economy. If the research succeeds, it could reshape how regulators oversee markets for pensions, mortgages, and insurance, nudging firms toward fairer product design rather than letting complexity hide traps. The team will work directly with UK regulatory bodies to translate findings into real-world rules. This is not fundamental science; it is applied behavioural economics with a clear target: making the consumer environment work better for ordinary people.
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Changes in the domain and complexity of consumer decision making raise key challenges for modern societies. Increasingly governments transfer responsibility for complex decisions away from the state towards the individual. The decline of state provision of social insurance and financial security has seen very important decisions, such as over retirement saving and personal protection insurance, become the responsibility of consumers, just as more familiar but often also highly complex decisions are. This project will drive forward scientific understanding of consumer behaviour in the face of difficult choices and of how public policy can intervene most effectively to promote their success. The modern consumer faces decisions of bewildering complexity, with choices to be made between numerous options differing from one another in multiple ways. Consider e.g. all the specifications of mobile phone and new car available in typical modern economies, and all the different pension schemes or insurance products. Besides the number and complexity of the options, consumers face uncertainty e.g. about reliability, service quality or resale value. Even when a great deal of information is available, it may be framed by firms or suppliers in ways intended to induce particular customer responses e.g. via complex utility tariffs or terms and conditions for financial products. Many choices involve consideration of costs and benefits spread over time, e.g. lifestyle and savings decisions, or large consumer durable purchases. Decades of research in behavioural science and psychology, and recent developments in behavioural economics, show that many individuals find even quite simple decisions difficult, are not always consistent, and often behave in ways reflecting biased or poor decision processes. The results can be highly detrimental to consumers concerned and, sometimes, to wider society. Our research programme, drawing on economics and psychology and at the cutting edge of interdisciplinary behavioural science, will advance understanding of consumer behaviour. Theme 1 will study foundations of individual choice, with particular attention to decision processes and consumers' responses to features of their environment. Theme 2 will examine how firms frame and structure environments for actual and potential customers in the light of behavioural characteristics of consumers of varying sophistication. It will focus on how firms' strategies affect and are in turn affected by competition between firms. Understanding this interaction is vital to successful regulation of consumer markets. Theme 2 will also study the form of appropriate regulation directly, in collaboration with UK regulatory bodies. Theme 3 will apply lessons of behavioural science to personal and household financial decision making - an area of consumer behaviour that typifies the combination of choice between multiple, complex products; uncertainty; time; and potential for serious consumer detriment. The work will be carried out by a team that is built out of, and develops, the existing Network for Behavioural Science, the hub of which is a partnership between leading behavioural science groups at the Universities of Nottingham, East Anglia and Warwick. The team will include world-renowned psychologists and economists, emerging scientists and team members with direct experience of consumer market regulation. The team will conduct and publicise research that achieves international academic recognition through publication in top-flight scientific journals and conferences. It will enhance the consumer environment for citizens by influencing policy formulation and consumer market regulation in the UK. By creating new data sets, training and nurturing researchers, and fostering an international research network with links between academics, the private sector and policy makers, the project will increase the research capacity of UK universities in behavioural science.
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