Working Paper: NBER ID: w17988
Authors: Andrew Caplin; Daniel J. Martin
Abstract: When choice options are complex, policy makers may seek to reduce decision making errors by making a high quality option the default. We show that this positive effect is at risk because such a policy creates incentives for decision makers to "drop out" by paying no attention to the decision and accepting the default sight unseen. Using decision time as a proxy for attention, we confirm the importance of this effect in an experimental setting. A key challenge for policy makers is to measure, and if possible mitigate, such drop out behavior in the field.
Keywords: default effects; nudges; bounded rationality; limited attention; rational inattention; mistakes
JEL Codes: D01; D03; D04; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| informative defaults (Y20) | decision quality (L15) |
| type of default (informative vs. random) (D80) | decision quality (L15) |
| informative defaults (Y20) | drop-out behavior (I21) |
| decision time (D79) | attention (Y60) |
| active choice policy (G52) | drop-out behavior (I21) |
| defaults (Y60) | decision quality (L15) |