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The Timing of Choice-Enhancing Policies

Takeshi Murooka () and Marco Schwarz

No 5983, CESifo Working Paper Series from CESifo Group Munich

Abstract: Recent studies investigate policies motivating consumers to make an active choice as a way to protect unsophisticated consumers. We analyse the optimal timing of such choice-enhancing policies when a firm can strategically react to them. In our model, a firm provides an automatic enrolment or renewal to consumers. We show that a conventional choice-enhancing policy, which decreases consumers’ switching costs when they are initially enroled, can be detrimental to consumer and social welfare. By contrast, an alternative policy that decreases consumers’ switching costs when the firm charges a higher price for the service increases consumer and social welfare more robustly.

Keywords: active choice; procrastination; present bias; automatic enrolment; automatic renewal; consumer naivete (search for similar items in EconPapers)
JEL-codes: D03 D18 D21 D40 L51 (search for similar items in EconPapers)
Date: 2016
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Related works:
Journal Article: The timing of choice-enhancing policies (2018) Downloads
Working Paper: The Timing of Choice-Enhancing Policies (2017) Downloads
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