Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/145018 
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper No. 5983
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), 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.
Subjects: 
active choice
procrastination
present bias
automatic enrolment
automatic renewal
consumer naivete
JEL: 
D03
D18
D21
D40
L51
Document Type: 
Working Paper
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