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Defaults and cognitive effort

Author

Listed:
  • Ortmann, Andreas
  • Ryvkin, Dmitry
  • Wilkening, Tom
  • Zhang, Jingjing

Abstract

We explore experimentally a cognitive-effort channel through which defaults might influence behavior in an insurance market setting where there is uncertainty in the benefits offered by different potential plans. We find that defaults can strongly influence purchasing behavior when participants can make decisions at their own pace and we document a positive correlation between the time subjects spend making a decision and the probability that they adjust away from the offered default. By contrast, we observe no significant impact of defaults in a treatment where we fix the decision time so that participants must spend 45 seconds on each decision screen without the possibility of moving faster. Our fixed-deliberation time manipulation lowers the opportunity cost of decision time and makes active deliberation less costly. The difference in treatments thus suggests that defaults operate in part by influencing the decisions of individuals who find the cognitive costs of active decision-making prohibitively high.

Suggested Citation

  • Ortmann, Andreas & Ryvkin, Dmitry & Wilkening, Tom & Zhang, Jingjing, 2023. "Defaults and cognitive effort," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 1-19.
    • Handle: RePEc:eee:jeborg:v:212:y:2023:i:c:p:1-19
    DOI: 10.1016/j.jebo.2023.05.020
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    2. Lars Behlen & Oliver Himmler & Robert Jäckle, 2023. "Defaults and effortful tasks," Experimental Economics, Springer;Economic Science Association, vol. 26(5), pages 1022-1059, November.

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    More about this item

    Keywords

    Default effect; Cognitive costs; Cognitive-effort channel; Insurance; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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