Goldin, Jacob and Reck, Daniel ORCID: 0000-0002-5732-4706 (2020) Optimal defaults with normative ambiguity. Review of Economics and Statistics. pp. 1-45. ISSN 0034-6535
Text (Optimal defaults with normative ambiguity)
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Abstract
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.
Item Type: | Article |
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Official URL: | https://www.mitpressjournals.org/loi/rest |
Additional Information: | © 2020 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology |
Divisions: | Economics |
Subjects: | H Social Sciences > HB Economic Theory |
Date Deposited: | 04 Aug 2020 13:24 |
Last Modified: | 27 Sep 2024 19:36 |
URI: | http://eprints.lse.ac.uk/id/eprint/105863 |
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