When consumers do not make an active decision: Dynamic default rules and their equilibrium effects

B-Tier
Journal: Games and Economic Behavior
Year: 2020
Volume: 124
Issue: C
Pages: 369-385

Score contribution per author:

2.011 = (α=2.01 / 1 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Dynamic defaults for recurring purchases determine what happens to consumers enrolled in a product or service who take no action at a decision point. Consumers may face automatic renewal, automatic switching, or non-purchase defaults. Privately optimal dynamic defaults depend on the contributions of adjustment costs versus costless opt-out frictions: both produce inertia under renewal defaults, but differ under non-renewal defaults. Defaults have equilibrium effects on pricing by changing the elasticity of repeat demand. Socially optimal defaults depend on firms' pricing responses as well; more elastic repeat demand restrains price increases on repeat customers and can reduce inefficient switching.

Technical Details

RePEc Handle
repec:eee:gamebe:v:124:y:2020:i:c:p:369-385
Journal Field
Theory
Author Count
1
Added to Database
2026-01-25