Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145018
Authors: 
Murooka, Takeshi
Schwarz, Marco A.
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5983
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.
Subjects: 
active choice
procrastination
present bias
automatic enrolment
automatic renewal
consumer naivete
JEL: 
D03
D18
D21
D40
L51
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.