Optimal Defaults with Normative Ambiguity
Keyword(s):
Default effects are pervasive, but the reason they arise is often unclear. We study optimal policy when the planner does not know whether an observed default effect reflects a welfare-relevant preference or a mistake. Within a broad class of models, we find that determining optimal policy is impossible without resolving this ambiguity. Depending on the resolution, optimal policy tends in opposite directions: either minimizing the number of non-default choices or inducing active choice. We show how these considerations depend on whether active choosers make mistakes when selecting among non-default options. We illustrate our results using data on pension contribution defaults.
Keyword(s):
Keyword(s):
Keyword(s):
1997 ◽
Vol 77
(4)
◽
pp. 585-591
◽
2015 ◽
Vol 7
(2)
◽
pp. 81-108
◽
Keyword(s):
2017 ◽
Vol 6
(1)
◽
pp. 1-22
Keyword(s):
1980 ◽
Vol 38
◽
pp. 350-351
2013 ◽
Vol 3
(1)
◽
pp. 22-33
◽
Keyword(s):