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Professor Michael Waterson demonstrated how two consumer activities — search and switching — are necessary if competition is to benefit consumers. He showed how search and switching costs inhibit the competitive process; highlighted how firms increase these costs in retail, banking, insurance and energy markets, and recommended government measures to empower consumers. Regulators around the world have used Waterson's research to enhance the consumer benefits from competition. Professor Gregory Crawford also analysed switching costs, estimating the costs of automatically renewable contracts in the UK telephone market. Based on this analysis, Ofcom banned rollover contracts for all residential and small business customers of voice telephone and broadband services, reducing households' and small businesses' switching costs by at least £340 million/year.
Derek Bunn has led a research programme on understanding competition, market evolution, and prices in electricity markets. He and other researchers in the LBS Energy Markets Group have modelled production facilities in detail, their explicit ownerships, and the price-formation process. Their use of computational learning provides subtle insights which have eluded conventional approaches. The LBS group was the first to do this, and the approach is now widely applied. Relevance of the work is recognised via funding from major energy companies and research organisations. In terms of external impact, this work has informed extensive advice to several government inquiries, stimulated further research, and is actively used by commericial businesses.
The Coalition government's manifesto commitments to remove compulsion in the annuity market necessitated a decision about a Minimum Income Requirement (MIR). Cannon's contribution to the government consultation played a significant role in setting the MIR. Previous research by Cannon had shown that the UK compulsory-purchase annuity market was efficient because compulsion expanded market size (more than half of all annuities are sold in the UK) and reduced selection effects. This research enabled the government to justify retaining an element of compulsion. The precise level of the MIR used in the 2011 Finance Bill was based upon the methodology proposed by Cannon.
Research in the Centre for Competition and Regulatory Policy (CCRP) at City University London has influenced extensively UK competition policy and continues to do so. The research has influenced directly the Department for Business, Innovation and Skills (BIS) in the development of the new Enterprise and Regulatory Reform Act 2013 (ERR Act). A process of engagement including two Round Tables chaired by Professor John Cubbin and a corresponding documentary submission, shaped the way in which the ERR Act gives enhanced powers to a unified competition authority, the Competition and Markets Authority (CMA). The research impacted on the eventual form of this new institution, especially in its independence in merger and market inquiries between Phase 1 (Could there be a problem?) and Phase 2 (What do we do about it?), which were previously carried out by the Office of Fair Trading and the Competition Commission respectively. The Centre's input into the Act has also been central in influencing how the CMA will retain and enhance the role of members of the panel of independent "external" experts.
From the 1990s UCL Economics invested in the capacity to conduct fundamental and applied research in behavioural and experimental economics. This was the basis for the research which provided the evidence base for the Office of Fair Trading to identify and act upon misleading pricing practices, particularly `drip pricing', in 2010. As a result, 12 major airlines announced that they would include debit card charges in their headline prices, and government announced that the EU-wide Consumer Rights Directive would be implemented a year earlier than it was due to go into effect.
Professor John Nankervis' Inland Letter Traffic Models (ILTMs) forecast demand for Royal Mail's letter business and provide estimates of the effects on letter traffic of economic activity, the cost of letters and competition in the communications market. These estimates directly influence Royal Mail's strategic business plans and pricing policies, have fed into applications to the regulators for stamp price changes and formed part of the evidence base for The Postal Services Bill, passed into Law in June 2011, which sets out the future of UK postal services provision.
The banking crisis that followed the collapse of Northern Rock in 2007 resulted in an urgent need to inject liquidity into the financial system. In order to resolve these issues, the Bank of England asked Professor Klemperer, an expert in auction theory, to help re-dseign its long-term market operations to allow the Bank of England to auction loans backed by financial collateral of varying quality. Since 2010, this has been adopted as the Bank of England's standard mechanism for its long-term repurchase operations. The potential impact of the new auction design extends beyond the Bank of England to other central banks, private industry and to industry regulators.
Research undertaken at the University of East Anglia (UEA) has identified whether consumers are likely to switch supplier, whether they are likely to get a good deal, and how companies are likely to respond to specific regulatory intervention. Such research findings challenge regulators to make better decisions. An appropriate regulatory framework leads to better decisions by consumers, helping markets to work better, and resulting in lower prices and bills. This is particularly critical in the energy and water sector, which are of crucial importance to each of the 25 million households in the UK, and where implementation of some of these research findings could lead to reductions of 6% in household energy bills (which translates to a total saving of over £2.1 billion a year).