Default options and social welfare

Opt in versus opt out

J.M.C. Bouckaert, H.A. Degryse

Research output: Contribution to journalArticleScientificpeer-review

Abstract

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 that when 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.
Original languageEnglish
Pages (from-to)468-489
JournalJournal of Institutional and Theoretical Economics
Volume169
Issue number3
Publication statusPublished - 2013

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Social welfare
Customer information
Free entry
Pricing strategy
Welfare comparisons

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Bouckaert, J.M.C. ; Degryse, H.A. / Default options and social welfare : Opt in versus opt out. In: Journal of Institutional and Theoretical Economics. 2013 ; Vol. 169, No. 3. pp. 468-489.
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Default options and social welfare : Opt in versus opt out. / Bouckaert, J.M.C.; Degryse, H.A.

In: Journal of Institutional and Theoretical Economics, Vol. 169, No. 3, 2013, p. 468-489.

Research output: Contribution to journalArticleScientificpeer-review

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