Passive Choices and Cognitive Spillovers

Abstract

Passive behavior is ubiquitous - even when facing various alternatives to choose from, people commonly fail to take decisions. This paper provides evidence on the cognitive foundations of such "passive choices" and studies implications for policies that encourage active decision-making. In an experiment designed to study passive behavior, we document three main results. First, we demonstrate that scarcity of cognitive resources leads to passive behavior. Second, policies that encourage active choice succeed in reducing passivity and improve decisions in the targeted domain. Third, however, these benefits of choice-promoting policies come at the cost of negative cognitive spillovers to other domains.

Keywords: scarcity, default options, cognitive resources, passivity, active decision-making, spillover effects

JEL Classification: D91, D01, D04, C91