Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185719
Authors: 
Murooka, Takeshi
Schwarz, Marco
Year of Publication: 
2017
Series/Report no.: 
Discussion Paper No. 49
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.
Subjects: 
active choice
automatic renewal
automatic enrollment
procrastination
consumer naivete
present bias
JEL: 
D03
D18
D21
D40
L51
Document Type: 
Working Paper

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