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The Timing of Choice-Enhancing Policies

Takeshi Murooka () and Marco Schwarz

No 49, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

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 our 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)
New Economics Papers: this item is included in nep-mic
Date: 2017-10-24
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Related works:
Journal Article: The timing of choice-enhancing policies (2018) Downloads
Working Paper: The Timing of Choice-Enhancing Policies (2016) Downloads
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