Optimal Default Options

63 Pages Posted: 13 Sep 2021 Last revised: 15 Mar 2023

See all articles by B. Douglas Bernheim

B. Douglas Bernheim

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Jonas Mueller Gastell

Stanford Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: December 2020

Abstract

Previous studies of optimal default options demonstrate that either opt-out minimization or maximization is optimal under restrictive conditions. We obtain a general characterization of the solution by studying optimal defaults when one of the problem's parameters approaches a limiting value. We interpret these “asymptotic optima” as approximate optima for non-limiting cases and justify this interpretation through numerical simulations. When the designer and choosers agree about the activity's value, simple forms of weighted opt-out minimization are asymptotically optimal. Additional results encompass Pigouvian fees, normative ambiguity, and cases in which the designer and choosers disagree about the activity's value.

Suggested Citation

Bernheim, B. Douglas and Mueller Gastell, Jonas, Optimal Default Options (December 2020). NBER Working Paper No. w28254, Available at SSRN: https://ssrn.com/abstract=3922485

B. Douglas Bernheim (Contact Author)

Stanford University - Department of Economics ( email )

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Jonas Mueller Gastell

Stanford Department of Economics ( email )

Stanford, CA
United States

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