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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.

Suggested Citation

  • Andrew Caplin & Daniel J. Martin, 2012. "Defaults and Attention: The Drop Out Effect," NBER Working Papers 17988, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17988
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    References listed on IDEAS

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    1. Gabriel D. Carroll & James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2009. "Optimal Defaults and Active Decisions," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1639-1674.
    2. Patrick Bolton & Antoine Faure-Grimaud, 2009. "Thinking Ahead: The Decision Problem," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1205-1238.
    3. Ariel Rubinstein, 2007. "Instinctive and Cognitive Reasoning: Response Times Study," Levine's Bibliography 321307000000001011, UCLA Department of Economics.
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    Cited by:

    1. Kenan Kalaycı & Marta Serra-Garcia, 2016. "Complexity and biases," Experimental Economics, Springer;Economic Science Association, vol. 19(1), pages 31-50, March.
    2. Altmann, Steffen & Falk, Armin & Heidhues, Paul & Jayaraman, Raji, 2014. "Defaults and Donations: Evidence from a Field Experiment," CEPR Discussion Papers 10303, C.E.P.R. Discussion Papers.
    3. repec:eee:joecag:v:1-2:y:2013:i::p:83-89 is not listed on IDEAS
    4. Tse, Alan & Friesen, Lana & Kalaycı, Kenan, 2016. "Complexity and asset legitimacy in retirement investment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 60(C), pages 35-48.
    5. 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).
    6. Blumenstock, Joshua & Callen, Michael & Ghani, Tarek, 2016. "Mobile-izing Savings with Automatic Contributions: Experimental Evidence on Present Bias and Default Effects in Afghanistan," CEPR Discussion Papers 11400, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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