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Defaults and Attention: The Drop Out Effect

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  • 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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17988.

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Date of creation: Apr 2012
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Handle: RePEc:nbr:nberwo:17988

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Cited by:
  1. Altmann, Steffen & Falk, Armin & Grunewald, Andreas, 2013. "Incentives and Information as Driving Forces of Default Effects," IZA Discussion Papers 7610, Institute for the Study of Labor (IZA).
  2. Kalayc─▒, Kenan & Serra-Garcia, Marta, 2012. "Complexity and Narrow Bracketing in Credit Choice," Discussion Papers in Economics 13035, University of Munich, Department of Economics.

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