Default effect

Among the set of options that agents choose from, the default option is the option the chooser will obtain if he or she does nothing. Broader interpretations of default options include options that are normative or suggested. Experiments and observational studies show that making an option a default increases the likelihood that it is chosen; this is called the default effect. Different causes for this effect have been discussed. Setting or changing defaults therefore has been proposed as an effective way of influencing behavior—for example, with respect to deciding whether to become an organ donor,[1] giving consent to receive e-mail marketing, or choosing the level of one's retirement contributions.

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Nudge theory

Default effect

Endogenous default effects

In a choice context, a default refers to that option which choosers end up with if they do not make an active choice. This notion is similar to the one in computer science where defaults are settings or values that are automatically assigned outside of user intervention. Setting the default affects how likely people end up with an option. This is called the default effect. More precisely, it refers to changes in the probability that an agent chooses a particular option when it is set as a default as opposed to the situation where this option has not been set as default. For example, different countries have different rules on how to become an organ donor. In countries with the opt-in policy, all citizens are automatically considered as non-donors unless they actively register as donors. In countries with the opt-out policy, all citizens are automatically considered as donors unless they actively seek to be struck from the register. It has been argued that this difference in policy is the main cause of the significant difference in donor rates across the respective countries.[1]

Exogenous default effects

Some default effects are implied by the situation. In social settings, for example, the normative choice (what others are doing) may be adopted unconsciously as a social default effect.[2] People are thus more likely to choose what they observe other choosing, even if they do not believe that other person is the more knowledgeable person. People are also more likely to treat choices that require less justification as defaults. The default option for parole hearings, for example, is to deny prisoners parole.[3]

Explanations

A number of different explanations have been offered for how default setting causes a change in the choice distribution. These include Cognitive Effort, Switching Costs, Loss Aversion, Recommendation and Change of Meaning.

Cognitive effort

If an agent is indifferent or conflicted between options, it may involve too much cognitive effort to base a choice on explicit evaluations. In that case, he or she might disregard the evaluations and choose according to the default heuristic instead, which simply states “if there is a default, do nothing about it”.[4] Evidence supporting this cognitive effort account is provided in the realm of social default effects. Participants distracted by a demanding concurrent task were more likely to choose the one of two snacks that they saw a previous participant choose. Increasing the number of snacks received as a function of the choice decreased this social default effect.[2]

Switching costs

If an agent faces costs when diverging from a default that surmount the possible benefits from switching to another option, then it is rational to stick with the default option. Costs of diverging from the default might involve costs for the search of information (time, consultancy fees) and/or costs for registering the choice (time, postage, lawyer fees). This amounts to a standard transaction cost explanation from rational choice theory.

Loss aversion

If an agent evaluates options on multiple dimensions, then the default functions as a reference point from which some dimensions are interpreted as losses and therefore becomes more important for the choice.[5] This loss aversion explanation of the default effect can be illustrated with the following example. Let A, B and C be three different pension saving plans. The agent evaluates them (in terms of time-discounted utilities) on the two following dimensions, current consumption and future savings which obviously trade off: the more one saves for the future, the less one can consume in the present.

ABC
Consumption102030
Savings302010

Seen from plan A being the default, plans B and C constitute losses in the savings dimension. Seen from plan C being the default, however, plans A and B constitute losses in the consumption dimension. According to the theory of loss aversion, that dimension which is considered a loss influences the decision stronger than that which is considered a gain. Hence for either default A or C, the loss-averse agent would choose sticking with the default.

Recommendation

If an agent interprets the default as a signal from the policy maker, whom he or she sufficiently trusts, he or she might rationally decide to stick with this default. That the policy maker sets a default is interpreted as an implicit recommendation to choose that default option. The information taken from this recommendation might be sufficient to change some people's preferences.[6]

Change of meaning

Defaults also might affect the meaning of choice options and thus agents' choices over them. For example, it has been shown that under an opt-in policy in organ donation choosing not to become an organ donor is perceived as a choice of little moral failing. Under an opt-out policy, in contrast, choosing not to be an organ donor is perceived as morally more deficient.[7] Alternatively, families may perceive those choosing to be an organ donor under an opt-out system as less committed than those in an opt-in system, and so refuse to allow their relatives organs to be harvested [8] These differences in evaluation might affect the rational choice over these options.

Default setting as a policy instrument

Setting or changing defaults has been proposed as an effective way of influencing behaviour—for example, with respect to deciding whether to become an organ donor,[1] giving consent to receive e-mail marketing,[9] choosing car insurance plans,[10] choosing which food to eat,[2] selecting which car options to purchase,[11] choosing between different energy providers,[12] or choosing the level of one's retirement contributions.[13] Setting defaults are an important example of nudges or soft paternalist policies.

gollark: But then hibernation probably won't work.
gollark: Or excessively often/on interactive enough processes/some other metric.
gollark: I want it to swap, but also to kill processes if it starts swapping excessive amounts.
gollark: Sometimes it fixes itself after a few minutes, which is very annoying still, but sometimes it doesn't, which is also very annoying.
gollark: It isn't. I consider this UTTER freezing.

References
  1. Johnson, E. J.; Goldstein, D. (2003). "MEDICINE: Do Defaults Save Lives?". Science. 302 (5649): 1338–1339. doi:10.1126/science.1091721. PMID 14631022.
  2. Huh, Young Eun; Vosgerau, Joachim; Morewedge, Carey K. (2014-10-01). "Social Defaults: Observed Choices Become Choice Defaults". Journal of Consumer Research. 41 (3): 746–760. doi:10.1086/677315. ISSN 0093-5301.
  3. Danziger, Shai; Levav, Jonathan; Avnaim-Pesso, Liora (2011-04-26). "Extraneous factors in judicial decisions". Proceedings of the National Academy of Sciences. 108 (17): 6889–6892. Bibcode:2011PNAS..108.6889D. doi:10.1073/pnas.1018033108. ISSN 0027-8424. PMC 3084045. PMID 21482790.
  4. Gigerenzer, G. (2008). "Why Heuristics Work". Perspectives on Psychological Science. 3 (1): 20–281. doi:10.1111/j.1745-6916.2008.00058.x. PMID 26158666.
  5. Tversky, A.; Kahneman, D. (1991). "Loss Aversion in Riskless Choice: A Reference-Dependent Model". The Quarterly Journal of Economics. 106 (4): 1039. CiteSeerX 10.1.1.703.2614. doi:10.2307/2937956. JSTOR 2937956.
  6. McKenzie, C. R. M.; Liersch, M. J.; Finkelstein, S. R. (2006). "Recommendations Implicit in Policy Defaults". Psychological Science. 17 (5): 414–420. doi:10.1111/j.1467-9280.2006.01721.x. PMID 16683929.
  7. Davidai, S.; Gilovich, T.; Ross, L. D. (2012). "The meaning of default options for potential organ donors". Proceedings of the National Academy of Sciences. 109 (38): 15201–5. Bibcode:2012PNAS..10915201D. doi:10.1073/pnas.1211695109. PMC 3458339. PMID 22949639.
  8. Lin, Y.; Osman, M.; Harris, A.; Read, D. (2018). "Underlying wishes and nudged choices". Journal of Experimental Psychology: Applied. 24 (4): 459–575. doi:10.1037/xap0000183. PMID 30113195.
  9. Johnson, E. J.; Bellman, S.; Lohse, G. L. (2002). "Defaults, Framing and Privacy: Why Opting In-Opting Out". Marketing Letters. 13: 5–15. doi:10.1023/A:1015044207315.
  10. Johnson, E. J.; Hershey, J.; Meszaros, J.; Kunreuther, H. (1993). "Framing, probability distortions, and insurance decisions". Journal of Risk and Uncertainty. 7: 35–51. doi:10.1007/BF01065313.
  11. Park, C. W.; Jun, S. Y.; MacInnis, D. J. (2000). "Choosing What I Want Versus Rejecting What I Do Not Want: An Application of Decision Framing to Product Option Choice Decisions". Journal of Marketing Research. 37 (2): 187. doi:10.1509/jmkr.37.2.187.18731.
  12. Pichert, D.; Katsikopoulos, K. V. (2008). "Green defaults: Information presentation and pro-environmental behaviour". Journal of Environmental Psychology. 28: 63–73. doi:10.1016/j.jenvp.2007.09.004.
  13. Beshears, J.; Choi, J. J.; Laibson, D.; Madrian, B. C. (2009). "The Importance of Default Options for Retirement Saving Outcomes". Social Security Policy in a Changing Environment. p. 167. doi:10.7208/chicago/9780226076508.003.0006. ISBN 978-0-226-07648-5. S2CID 168537180.
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