Thursday, September 27, 2012

T-Mobile Teaches Me a Lesson in Behavioral Economics

I have learned about the power of inertia the hard way.  I often travel abroad so when I travel to exotic places I call up my cell phone carrier (T-Mobile) to place me on the international rate category.  I always tell them the dates when I'm leaving the USA and returning home.  I had assumed that my cell phone company would start my international rate when I leave and end it when I return.  This assumption turns out to be false. T-Mobile earns more $ from me (roughly $20 a month) when I'm on the international rate and once I was on it, this company was happy to keep me on that rate.  I had falsely assumed that this company switches me off the plan when I return to the U.S (and they know the date I return and I'm 99% sure I told them to stop the plan when I returned).  I pay my bill using direct pay but in the monthly statement, I saw that my monthly bill was roughly $20 more than what I expect but until I called T-Mobile I didn't connect the dots concerning my being billed for the International deal when I was in the USA.

So, the interesting point here isn't that I'm a sucker.  The more interesting point is that there is a synergy between "direct pay" and the "opt out".   Since I wasn't writing a check each month, I didn't give much thought to really itemizing my cell phone bill and my International Plan was an explicit  "opt out".  How much windfall profit does T-Mobile earn from such hustles?   What other examples exist of this being billed for services we don't need in a user friendly way that doesn't draw explicit attention to it?

I am a victim.  Will Elizabeth Warren protect me?

3 comments :

Amber Sayon said...

Great work....

Dan said...

I guess the "classic" example of this is Finkelstein's work (QJE 2009) on EZ tax. It's not quite "services we don't need" but she shows that on highway routes with EZ-pass (i.e. automatic electronic toll systems), rates rise faster and people less likely

Sizzling LEO said...

Today, on my monthly sojourn to the T-Mobile Business Mobiles store to pay my bill, I again mentioned my dissatisfaction with my bill of roughly $90, and the non-consistent service I've been getting for a while. I ca literally sit in one place and and watch as my service goes in and out, or be using my device and in the middle of adequate service, the entire voice and data connections is lost.