DEFAULT SETTINGS Opt-in, opt-out

1. DEFAULT SETTINGSOpt-in, opt-out

2. DEFINITION

3. Defaults – A Definition When presented with default options already set, consumers tend to accept what is presented to them. Intuitively, consumers often go with the flow,act without considering other options and just look at what is presented to them without investigating further.

4. SCIENTIFIC EVIDENCE

5. Science background: When defaults work best Defaults may be ineffective when: Defaults tend to work well when: People have strong preferences that go againstthe default. People are lazy and don’t think it is worth the effort to make a choice. People tend to procrastinatewith making a choice. The decision is salient receiving lots of attention and consideration. The decision is complex and unfamiliar. The default is implausible or manipulative. The decision is dull. People enjoy making the choice and deciding by themselves. People do not have well-defined preferences. The choice architect who suggests the default is not seen as credible. The default is seen as an implicit recommendation. Sunstein, Cass R., Nudges That Fail (July 18, 2016). Available at SSRN:

6. EXAMPLESUsing default bias to change behaviour

7. Nudging university staff to receive influenza vaccinations (i) Behavioural challenge: Influenza is a serious disease that can lead to hospitalization and sometimes even death. Flu vaccinations are important in preventing people from getting sick during the flu season. However, many people do not receive an annual flu shot even when it is available for free at the workplace. Chapman, G. B., Li, M., Colby, H., & Yoon, H. (2010). Opting in vs opting out of influenza vaccination. Jama, 304(1), 43-44. doi:10.1001/jama.2010.892

8. Nudging university staff to receive influenza vaccinations (i) Behavioural intervention: Behavioural economists sent 480 faculty and staff employees at Rutgers University either an opt-in or opt-out email: Opt-in Opt-out People were informed they had been given a flu shot appointment, including the day, time and location. However, people could change or cancel the appointment. The e-mail explained that free seasonal flu shots were available and provided a link where people could sign up. 33% received a flu shot 45% received a flu shot Chapman, G. B., Li, M., Colby, H., & Yoon, H. (2010). Opting in vs opting out of influenza vaccination. Jama, 304(1), 43-44. doi:10.1001/jama.2010.892

9. Being the default option is extremely valuable Google recently paid Apple $1 billion to remain the default search engine on the iPhone. Google also paid millions to remain the default on popular web browsers. Joel Rosenblatt and Adam Satariano. ‘Google Paid Apple $1 Billion to Keep Search Bar on iPhone’, January 21, 2016 Bloomberg News

10. When defaults lead to dishonesty Behavioural scientists Nina Mazar and Scott Hawkinslooked at howdefault answersin forms influence people's levels of honesty. They found: We cheat most when we can passively accept an incorrect answer by default We cheat less when we must override a correct default answer to give an untruthful answer We tend to accept the existing truthful answer; it is psychologically hardto take action and change what is true to a false answer. Example: A company prepopulates expense forms for car mileage based on the distance stated on Google Maps, but employees can edit the form. Response: Most employees will accept the correct default and honestly report their car mileage. We omit to correct an existing answer or just leave a field blank and do nothing. Example: A 14-year old teenager wants to view an adult TV show online. The box “I am 18 or older” is already ticked. Response: The teenager is likely to accept the incorrect default and lie about his age. Example: forms that require an applicant to write “nil” in key fields rather than a blank response (i.e., go with the default). Mazar, Nina and Hawkins, Scott, Choice Architecture in Conflicts of Interest: Defaults as Physical and Psychological Barriers to (Dis)Honesty (April 11, 2015). Journal of Experimental Social Psychology, Forthcoming

11. Default settings for passwords

12. Defaults on Facebook

13. Change the Default Setting – Organ Donation

14. Default Bias in charitable donations The UK’s Behavioural Insight Team tested the effect that changing the default might have a scheme to automatically increase payroll giving by 3% year on year. By changing the default so employees would have to ‘opt out’ of automatic increases, participation increased from 6% to 49%!

15. Changing the default setting for salt! (i) Buenos Aires changed the default by taking salt cellars off the table in restaurants

16. Changing the default setting for salt! (ii) Buenos Aires changed the default by taking salt cellars off the table in restaurants • 3.7 million residents suffer from hypertension • They consume 13 grams of salt per day • Nearly 3 times the WHO recommended limit!

17. Default options for car insurance Preselected defaults when buying car insurance can be very persuasive. Pre-selected as default

18. Changing the default setting at Disney (i)

19. Changing the default setting at Disney (ii) Disney changed the default side orders on its kids’ menus from unhealthy to healthy options • Source: “Walt Disney Company – 2008 Corporate Responsibility Report.” 2008.

20. Bank of America’s ‘Keep the Change’ account A bank account that automatically ‘saves your change’. How the account works: • Buy a coffee for $2.50 on your BofA bank card • BofA will round up the purchase to $3; and • Save the $0.50 into your savings account

21. Green energy as a default (i) A recent study of 41,952 German households used opt-out defaults to nudge people into ‘green’ energy use. Source: Ebeling, F., & Lotz, S. (2015). Domestic uptake of green energy promoted by opt-out tariffs. Nature (online)

22. Green energy as a default (ii) STUDY TASK: 40,000 German households who were selecting home electricity provision online were given either an opt-in or opt-out default for green energy provision: • Opt-in: the box presenting “100 % green” as an “optional choice” had to be actively checked • Opt-out: the box presenting “100 % green” as an “optional choice” was already checked or needed to be actively unchecked: 100% green (+ 0.3 Cents per unit) RESULTS: Opt-out: 69.1% purchased ‘green’ energy Opt-in: 7.2% purchased ‘green’ energy Source: Ebeling, F., & Lotz, S. (2015). Domestic uptake of green energy promoted by opt-out tariffs. Nature (online)

23. Applying opt-out: US Auto-enrolment Pensions Researchers increased enrolment in pensions in the US by auto-enrolling employees in a company pension Source: Madrian and Shea (2001)

24. Applying opt-out: UK Auto-enrolment Pensions In 2012, the UK Government’s Department for Work and Pensions (DWP) successfully introduced automatic enrolment for workplace pensions. People are automatically enrolled but can opt-out if they choose. By 2015, opt-out rates were still lower than expected - between 8 and 14% - rather than the 28% the Department for Work and Pensions originally estimated.

25. QUOTES

26. “The combination of loss aversion with mindless choosingimplies that if an option is designated as the “default”, it will attract a large market share. Default options thus act as powerful nudges.” Richard Thaler, Professor at the University of Chicago

27. Behavioural Insights Team Annual Report 2014 Chapman, G. B., Li, M., Colby, H., & Yoon, H. (2010). Opting in vs opting out of influenza vaccination. Jama, 304(1), 43-44. Ebeling, F., & Lotz, S. (2015). Domestic uptake of green energy promoted by opt-out tariffs. Nature (online) Johnson, E., Goldstein, D. “Do defaults save lives?” Science, Vol. 302, Nov 2003 Ofcom Communications Report 2012 (online) Sunstein, Cass R., Nudges That Fail (July 18, 2016). Available at SSRN: “Walt Disney Company – 2008 Corporate Responsibility Report.” 2008.