TY  - JOUR
AU  - Carlin,Bruce Ian
AU  - Gervais,Simon
AU  - Manso,Gustavo
TI  - When Does Libertarian Paternalism Work?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15139
PY  - 2009
Y2  - July 2009
UR  - http://www.nber.org/papers/w15139
L1  - http://www.nber.org/papers/w15139.pdf
N1  - Author contact info:
Bruce I. Carlin
Anderson Graduate School of Management
UCLA
110 Westwood Plaza, Suite C413
Los Angeles, CA 90095-1481
Tel: 310/825-7246
E-Mail: bruce.carlin@anderson.ucla.edu

Simon Gervais
Fuqua School of Business
Duke University
One Towerview Drive
Durham, NC 27708-0120
Tel: 919-660-7683
Fax: 919-660-7990
E-Mail: sgervais@duke.edu

Gustavo Manso
MIT
Sloan School
E-Mail: manso@mit.edu
AB  - We develop a theoretical model to study the effects of libertarian paternalism on knowledge acquisition and social learning. Individuals in our model are permitted to appreciate and use the information content in the default options set by the government. We show that in some settings libertarian paternalism may decrease welfare because default options slow information aggregation in the market. We also analyze what happens when the government acquires imprecise information about individuals, and characterize its incentives to avoid full disclosure of its information to the market, even when it has perfect information. Finally, we consider a market in which individuals can sell their information to others and show that the presence of default options causes the quality of advice to decrease, which may lower social welfare.
ER  -