Dec 27, 2012 Report No：12-16
Default Effects, Transaction Costs, and Imperfect Information
- Chris M. WilsonSchool of Business and Economics, Loughborough University
- Luke GarrodSchool of Business and Economics, Loughborough University
- Alistair MunroGRIPS
We develop a decision framework with imperfect information to analyze the effects
of transaction costs on the tendency for individuals to remain with a default option.
We demonstrate how transaction costs can be a more important source of such default
effects than commonly thought. A further, potentially surprising result shows that
transaction costs are able to explain why some forms of default effects increase with
the number of options.
||Default effect; transaction cost; imperfect information.