Default Tips

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. (JEL D12, L92)