Default Tips

Haggag, Kareem; Paci, Giovanni

We examine the role of defaults in high-frequency, small-scale choices using
unique data on over 13 million NYC taxi rides. We exploit a shift in the set of default tip suggestions presented to customers prior to payment, as the base fare changes from below $15 to above $15. Using a regression discontinuity design, we show that default 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 all fares above $15. 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.



More About This Work

Academic Units
Department of Economics, Columbia University
Department of Economics Discussion Papers, 1213-21
Published Here
March 21, 2013