TY  - BOOK
AU  - Choi,James
AU  - Laibson,David
AU  - Madrian,Brigitte
AU  - Metrick,Andrew
ED  - National Bureau of Economic Research.
TI  - Passive Decisions and Potent Defaults
T2  - NBER working paper series
PY  - 2003///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - August 2003; Hardcopy version available to institutional subscribers
N2  - Default options have an enormous impact on household  choices.' Defaults matter because opting out of a default is costly and these costs change over time, generating an option value of waiting. In addition, people have a tendency to procrastinate. We develop a theory of optimal defaults based on these considerations. We find that it is sometimes optimal to set extreme defaults, which are far away from the mean optimal savings rate. A default that is far away from a consumer's optimal savings rate may make that consumer better off since such a  bad' default will lead procrastinating consumers to more quickly opt out of the default. We calibrate our model and use it to calculate optimal defaults for employees at four different companies. Our work suggests that optimal defaults are likely to be at one of three savings rates: the minimum savings rate (i.e., 0%), the match threshold (typically 5% or 6%), or the maximal savings rate
UR  - https://www.nber.org/papers/w9917
UR  - http://dx.doi.org/10.3386/w9917
ER  -