American Economic Journal: Applied Economics: Vol. 6 No. 3 (July 2014)

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Default Tips

Article Citation

Haggag, Kareem, and Giovanni Paci. 2014. "Default Tips." American Economic Journal: Applied Economics, 6(3): 1-19.

DOI: 10.1257/app.6.3.1

Abstract

We examine the role of defaults in high-frequency, small-scale choices using unique data on over 13 million New York City taxi rides. Using a regression discontinuity design, we show that default tip suggestions have a large impact on tip amounts. These results are supported by a secondary analysis that uses the quasi-random assignment of customers to different cars to examine default effects on a wider range of fares. Finally, we highlight a potential cost of setting defaults too high, as a higher proportion of customers opt to leave no credit card tip when presented with the higher suggested amounts.

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Online Appendix (1,000.05 KB) | Download Data Set (15.54 GB) | Author Disclosure Statement(s) (286.20 KB)

Authors

Haggag, Kareem (U Chicago)
Paci, Giovanni (Columbia U)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
L92: Railroads and Other Surface Transportation

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