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Default Options and Social Welfare: Opt In versus Opt Out

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  • Jan Bouckaert
  • Hans Degryse

Abstract

We offer a social-welfare comparison of the two most prominent default options - opt in and opt out - using a two-period model of localized competition. We demonstrate that when consumers stick to the default option, the prevailing default policy shapes firms´ ability to collect and use customer information, and affects their pricing strategy and entry decision differently. The free-entry analysis reveals that fewer firms enter under opt out as competition becomes harsher, and that opt out is the socially preferred default option.

Suggested Citation

  • Jan Bouckaert & Hans Degryse, 2013. "Default Options and Social Welfare: Opt In versus Opt Out," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(3), pages 468-489, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201309)169:3_468:doaswo_2.0.tx_2-f
    DOI: 10.1628/093245613X666289
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    References listed on IDEAS

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    Cited by:

    1. Oz Shy & Rune Stenbacka, 2016. "Customer Privacy and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(3), pages 539-562, September.

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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