With over 12.7 million mobile phone contracts being offered in the UK, is it possible for a consumer to make a rational decision when selecting a mobile phone tariff?

It is extremely unlikely that a consumer would be able to make a rational choice when selecting a mobile phone tariff due to the cognitive limitations of the human brain. As there are such a large number of phone deals, each with different options such as the amount of data, calls and texts, humans do not have the time nor the capabilities to assess all these different deals and make a utility-maximising decision. As argued by behavioural economist, Daniel Kahneman, humans will not use the 'System 2' part of the brain which is slow but rational, but will instead use 'System 1' to make fast decisions based on mental 'rules of thumb'. For example, a consumer may decide to choose the phone deal which has the largest reduction on, or the one with the largest number of texts. Alternatively, consumers may display status quo bias where they stick with their previous tariff, even when a better tariff option exists because humans naturally dislike change. Although these heuristics will likely result in the choice of an adequate phone deal, probability suggests that there will be better tariffs on the market and thus the consumer's choice will not be rational.However, this argument is in direct contradiction of standard neoclassical economic theory which suggests that consumers are capable of processing all available information and thus making a utility-maximising decision, i.e. processing all 12.7 million phone deals and choosing the best. It can be argued that because humans are supposed to be rational, they will be willing and able to take the time to do this. Furthermore, if the UK government can intervene to reduce the number of phone deals, the likelihood of selecting the optimal phone deal increases dramatically as there would be less information to process and consumers could be 'nudged' in the right direction. Despite this, however, it is likely that consumers will not be able to make a rational decision when selecting one of the 12.7 million phone deals; the idea of rationality is generally a simplifying assumption made by economists and the sheer number of tariffs means that consumers do not have the time nor the brains to decipher the best contract.

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