Active Choice, Implicit Defaults, and the Incentive to Choose

John  Beshears; James J. Choi; David  Laibson; Brigitte C. Madrian

Article | Organizational Behavior and Human Decision Processes | Forthcoming

Active Choice, Implicit Defaults, and the Incentive to Choose

by John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian

Abstract

Home-delivered prescriptions have no delivery charge and lower copayments than prescriptions picked up at a pharmacy. Nevertheless, when home delivery is offered on an opt-in basis, the take-up rate is only 6%. We study a program that makes active choice of either home delivery or pharmacy pick-up a requirement for insurance eligibility. The program introduces an implicit default for those who don’t make an active choice: pharmacy pick-up without insurance subsidies. Under this program, 42% of eligible employees actively choose home delivery, 39% actively choose pharmacy pickup, and 19% make no active choice and are assigned the implicit default. Individuals who financially benefit most from home delivery are more likely to choose it. Those who benefit least from insurance subsidies are more likely to make no active choice and lose those subsidies. The implicit default incentivizes people to make an active choice, thereby playing a key role in choice architecture.

Keywords: active choice; defaults; implicit defaults; incentives; Consumer Behavior; Decision Choices and Conditions; Motivation and Incentives;

Format: Print

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Citation:

Beshears, John, James J. Choi, David Laibson, and Brigitte C. Madrian. "Active Choice, Implicit Defaults, and the Incentive to Choose." Organizational Behavior and Human Decision Processes (forthcoming).

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Active Choice, Implicit Defaults, and the Incentive to Choose

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