Date Added: Mar 2010
Author developed a theoretical model to study the welfare effects of libertarian paternalism on information acquisition, social learning, and financial decision-making. Individuals in the model are permitted to appreciate and use the information content in the default options set by a social planner. Paper shows that in some circumstances the presence of default options can decrease welfare by slowing information propagation in the economy. An extension of the model shows that partial information disclosures by the social planner can increase individuals' incentives for gathering and sharing information, but that this does not affect the set of circumstances in which the absence of default options is optimal. Paper studies the effects of procrastination and excessive trust in the social planner on the analysis.