Default options and social welfare

Subtitle:opt in versus opt out

We offer a social-welfare comparison of the two most prominent default options opt in and opt out using a two-period model of localized competition. We demonstrate thatwhen consumers stick to the default option, the prevailing default policy shapes firms ability to collect and use customer information, and affects their pricing strategy and entry decision differently.The free-entry analysis reveals that fewer firms enter under opt out as competition becomes harsher, and that opt out is the socially preferred default option. (JEL: D11)

Publication year:2013

Keywords:A1 Journal article

BOF-keylabel:yes

BOF-publication weight:0.1

CSS-citation score:1

Authors:International

Authors from:Higher Education

Accessibility:Closed