Default Options and Social Welfare: Opt In versus Opt Out

Jan Bouckaert and Hans Degryse

Journal of Institutional and Theoretical Economics (JITE), 2013, vol. 169, issue 3, 468-489

Abstract: We offer a social-welfare comparison of the two most prominent default options - opt in and opt out - using a two-period model of localized competition. We demonstrate that when consumers stick to the default option, the prevailing default policy shapes firms´ ability to collect and use customer information, and affects their pricing strategy and entry decision differently. The free-entry analysis reveals that fewer firms enter under opt out as competition becomes harsher, and that opt out is the socially preferred default option.

JEL-codes: D11 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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DOI: 10.1628/093245613X666289

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