Incentives and Information as Driving Forces of Default Effects

Incentives and Information as Driving Forces of Default Effects

Date: 2013-09
By: Altmann, Steffen (IZA)
Falk, Armin (University of Bonn)
Grunewald, Andreas (University of Bonn)
URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7610&r=net
 
The behavioral relevance of non-binding default options is well established. While most research has focused on decision makers’ responses to a given default, we argue that this individual decision making perspective is incomplete. Instead, a comprehensive understanding of the foundation of default effects requires taking account of the strategic interaction between default setters and decision makers. We provide a theoretical framework to analyze which default options arise in such interactions, and which defaults are more likely to affect behavior. The key drivers are the relative level of information of default setters and decision makers, and their alignment of interests. We show that default effects are more pronounced if interests of the default setter and decision makers are more closely aligned. Moreover, decision makers are more likely to follow default options the less they are privately informed about the relevant decision environment. In the second part of the paper we experimentally test the main predictions of the model. We report evidence that both the alignment of interests as well as the relative level of information are key determinants of default effects. An important policy relevant conclusion is that potential distortions arising from default options are unlikely if decision makers are either well-informed or reflect on the interests of default setters.
Keywords: default options, libertarian paternalism, behavioral economics, incentives, laboratory experiment
JEL: D03
廣告

發表迴響

在下方填入你的資料或按右方圖示以社群網站登入:

WordPress.com 標誌

您的留言將使用 WordPress.com 帳號。 登出 /  變更 )

Google photo

您的留言將使用 Google 帳號。 登出 /  變更 )

Twitter picture

您的留言將使用 Twitter 帳號。 登出 /  變更 )

Facebook照片

您的留言將使用 Facebook 帳號。 登出 /  變更 )

連結到 %s