Cookies?
Library Header Image
LSE Research Online LSE Library Services

Optimal defaults with normative ambiguity

Goldin, Jacob and Reck, Daniel (2020) Optimal defaults with normative ambiguity. Review of Economics and Statistics. pp. 1-45. ISSN 0034-6535

[img] Text (Optimal defaults with normative ambiguity) - Accepted Version
Download (1MB)

Identification Number: 10.1162/rest_a_00945

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
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: 29 Aug 2020 23:29
URI: http://eprints.lse.ac.uk/id/eprint/105863

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics