Some of the most successful applications of behavioral economics are \"opt-out\"

Question

Some of the most successful applications of behavioral economics are "opt-out" programs, which automatically enroll eligible people unless they explicitly choose not to participate. The incentives and freedom of choice are exactly the same as in "opt-in" programs, where members must choose to participate, but enrollments are significantly higher under opt-out. Here's a look at three remarkable results Discussion Questions: (1) How would a behavioral economist explain the disparity in 401(k) enrollments among young employees between opt-out and opt-in programs? (2) Opt-in and opt-out programs ask us to make the same decisions, but achieve different results. Use the concepts of the framing effect and non-rational behavior to explain why.

Explanation / Answer

Answer:

A consumer’s financial transactions give rise to a wealth of very personal data. Every credit card purchase, every ATM withdrawal, every loan payment, every paycheck deposit leaves an electronic trace at a person’s bank. Advances in information technology now allow firms to collate information from disparate sources and compile comprehensive profiles of individual behavior. The resulting databases can allow businesses to target very specific consumer categories—high-income, gun-owning dog lovers, for example—in ways that were never before possible.

When should a bank be able to share information about you with other businesses? Some consumer advocates want to protect consumers’ financial privacy by restricting such information sharing. New technologies, they say,
have encouraged increased intrusions on consumer privacy, leading to more junk mail, more telemarketing calls, and a heightened risk of identity theft. They argue for tough “opt-in” laws that would require financial institutions to obtain a consumer’s explicit consent before sharing personal information about them.

Banks and other financial service providers point out that information sharing provides benefits to consumers by allowing for more targeted marketing and services. The new technologies make it easier for businesses to find
consumers that would be interested in buying their specialized products and services—hunting-dog training supplies, for example. Such marketing directly
benefits consumers when it results in a voluntary purchase. In addition,greater information sharing can reduce wasteful marketing to consumers that are likely to be uninterested. With these benefits in mind, financial service providers argue for “opt-out” laws that merely require them to give consumers the right to request that their information not be shared.

The person who choose opt out program is not directly involved in the program while the opt In employee is and it tells us that Opt Out employee reties on Employers.

Assume and think that his retirement plan will make of itself while the Opt In employee like to know what are the different options through which money can be used better and is more concerned about his retirement.

An Opt In Person likes to take more risks than the Opt Out person As he sees that better return or s Better Quality of retirement life is Possible If he takes Certain risks while he Opt out Person is risk averse and he know that there will be a positive return for his retirement fund and doean't want to take unnecessary risks.

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