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The timing of choice-enhancing policies

Takeshi Murooka () and Marco Schwarz

Journal of Public Economics, 2018, vol. 157, issue C, 27-40

Abstract: Recent studies investigate policies motivating consumers to make an active choice as a way to protect unsophisticated consumers. We analyze the optimal timing of such choice-enhancing policies when a firm can strategically react to them. In the model, a firm provides a contract with automatic renewal. We show that a policy intending to enhance consumers’ choices when they choose a contract can be detrimental to welfare. By contrast, a choice-enhancing policy at the time of contract renewal increases welfare more robustly. Our results highlight that policies should be targeted in timing to the actual choice inefficiency.

Keywords: Active choice; Automatic renewal; Automatic enrollment; Procrastination; Consumer naivete; Present bias (search for similar items in EconPapers)
JEL-codes: D03 D18 D21 D40 L51 (search for similar items in EconPapers)
Date: 2018
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Working Paper: The Timing of Choice-Enhancing Policies (2017) Downloads
Working Paper: The Timing of Choice-Enhancing Policies (2016) Downloads
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