Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7369641 | Journal of Public Economics | 2018 | 14 Pages |
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 the 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.
Related Topics
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Authors
Takeshi Murooka, Marco A. Schwarz,