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 , giving consent to receive e-mail marketing, or choosing the level of one's retirement contributions .          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 .
The default effect, a concept within the study of nudge theory, explains the tendency for an agent to generally accept the default option in a strategic interaction. The default option is the course of action that the agent, or chooser, will obtain if he or she does not specify a particular course of action. The default effect has broad applications for firms attempting to 'nudge' their customers in the direction of the firm's optimal outcome . Experiments and observational studies show that making an option a default increases the likelihood that such an option is chosen . There are two broad classes of defaults: mass defaults and personalised defaults. Setting or changing defaults has been proposed and applied by firms as an effective way of influencing behaviour —for example, with respect to setting air-conditioner temperature settings , giving consent to receive e-mail marketing, or automatic subscription renewals . Types of default options Mass defaultsPersonalised defaultsBenign defaultsSmart defaultsRandom defaultsPersistent defaultsHidden optionsAdaptive defaults Mass defaults Mass defaults are those which apply to all consumers of a product or service, that do not take into account each individual consumers preferences or characteristics. Mass defaults are useful when a firm cannot, or does not want to, invest time and financial means into allocating separate default options to each customer based on their individual profile and preferences. By their nature, mass defaults may fail to give some customers their first choice; however, in general, a mass default strategy can be useful to a firm if the majority of customers choose the default option. Benign defaults Representing a company's 'best guess' about what customers want and therefore, what to set as the default option. Random defaults This is where defaults are arbitrarily assigned to customers. This strategy occurs when a firm lacks understanding of the majority preferences, and none of the options would cause harm to the firm. Hidden options Firms can present the default as the only choice, when in fact, there are other 'hidden' options available. An example of this is the default ringtone on a phone; some consumers may be oblivious to the fact that there is a plethora of other ringtones available other than the system-default. Personalised defaults Personalised defaults are those where the firm tailors the default option to meet each individual customer's preferences or characteristics. This requires the firm to have data on each customer (customer segment) that can be used without breaching privacy policy concerns. Potential characteristics that may be observed are demographics, past choices and real-time decisions that a customer makes. Smart defaults Smart defaults use individual customer information such as demographics and other profiles, to personalise a default option that maximised utility for both the firm and the consumer. Persistent defaults Persistent defaults are generated by using data from individual consumers' past purchases and preferences to allocate a personalised default option to each customer. The notion behind the persistent default is that a customer's future choice is best predicted by viewing their past preferences. Adaptive defaults By constantly updating the profile of each customer based on live, real-time decisions which the individual makes. This is the best way to target each customer individually when there is a lack of data based on the customers' past preferences and demographic. Explanations A number of different explanations have been offered for how default setting causes a change in the choice distribution .
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Among the set of options that agents choose from, the default option is the option the chooser
The default effect, a concept within the study of nudge theory, explains the tendency for an agent to generally accept the default option in a strategic interaction. The default option is the course of action that the agent, or chooser,
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nothing. Broader interpretations of default options include options that are normative or suggested
not specify a particular course of action. The default effect has broad applications for firms attempting to 'nudge' their customers in the direction of the firm's optimal outcome
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it is chosen; this is called the default effect. Different causes for this effect have been discussed
such an option is chosen
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There are two broad classes of defaults: mass defaults and personalised defaults.
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therefore
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and applied by firms
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behavior
behaviour
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deciding whether to become an organ donor
setting air-conditioner temperature settings
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choosing the level of one's retirement contributions
automatic subscription renewals
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Types of default options Mass defaultsPersonalised defaultsBenign defaultsSmart defaultsRandom defaultsPersistent defaultsHidden optionsAdaptive defaults
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Mass defaults Mass defaults are those which apply to all consumers of a product or service, that do not take into account each individual consumers preferences or characteristics. Mass defaults are useful when a firm cannot, or does not want to, invest time and financial means into allocating separate default options to each customer based on their individual profile and preferences. By their nature, mass defaults may fail to give some customers their first choice; however, in general, a mass default strategy can be useful to a firm if the majority of customers choose the default option.
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Benign defaults Representing a company's 'best guess' about what customers want and therefore, what to set as the default option.
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Random defaults This is where defaults are arbitrarily assigned to customers. This strategy occurs when a firm lacks understanding of the majority preferences, and none of the options would cause harm to the firm.
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Hidden options Firms can present the default as the only choice, when in fact, there are other 'hidden' options available. An example of this is the default ringtone on a phone; some consumers may be oblivious to the fact that there is a plethora of other ringtones available other than the system-default.
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Personalised defaults Personalised defaults are those where the firm tailors the default option to meet each individual customer's preferences or characteristics. This requires the firm to have data on each customer (customer segment) that can be used without breaching privacy policy concerns. Potential characteristics that may be observed are demographics, past choices and real-time decisions that a customer makes.
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Smart defaults Smart defaults use individual customer information such as demographics and other profiles, to personalise a default option that maximised utility for both the firm and the consumer.
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Persistent defaults Persistent defaults are generated by using data from individual consumers' past purchases and preferences to allocate a personalised default option to each customer. The notion behind the persistent default is that a customer's future choice is best predicted by viewing their past preferences.
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Adaptive defaults By constantly updating the profile of each customer based on live, real-time decisions which the individual makes. This is the best way to target each customer individually when there is a lack of data based on the customers' past preferences and demographic.
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. These include Cognitive Effort, Switching Costs, Loss Aversion, Recommendation and Change of Meaning