RECAP — Usage-Based Disclosure

Definition

RECAP (Record, Evaluate, and Compare Alternative Prices) is Thaler and Sunstein's proposed alternative to conventional price or product regulation. Instead of capping what a company can charge, RECAP regulates disclosure: firms must publish their full fee schedule as usable formulas, and — crucially — must send each customer a personalized annual report of exactly how they used the product and what it actually cost them, in an electronic, machine-readable format. The personalized usage report is the key mechanism, because it lets third-party comparison sites do the hard cognitive work of translating complex pricing into "what would this actually cost me elsewhere."

In the Book

Chapter 8 introduces RECAP through the cell phone market: providers would have to disclose per-action pricing (what does it cost to answer a call in Toronto, or download email) and mail or post an annual statement itemizing every use and fee incurred. The book argues this lets independent websites, similar to travel-comparison sites, import a shopper's actual usage history and calculate what competing carriers would have charged for that same pattern of use — solving the problem that credit card and mortgage pricing (annual fees, late fees, foreign-currency charges, teaser rates) is too complex for consumers to mentally compute on their own. The idea is then applied across the book to mortgages and student loans (Chapter 8), and to Medicare Part D prescription drug plans (Chapter 10), where seniors face dozens of plans with different formularies and could receive a RECAP report showing what they actually spent on each drug that year.

Why It Matters

RECAP separates two things regulators usually bundle: controlling what a price is, versus controlling whether people can understand and compare it. It offers a low-intervention alternative wherever a market has complex, multi-part pricing that defeats comparison shopping — the fix isn't a price cap or a ban, it's forcing the seller to hand back the buyer's own data in a form that makes comparison cheap.