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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.

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Publisher
Department of Economics, Columbia University
Publication Origin
New York
Series
Department of Economics Discussion Papers, 1213-21
Academic Units
Economics
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