Optimal Defaults with Normative Ambiguity

Abstract Default effects are pervasive, but the reason they arise is often unclear. We study optimal policy when planner does not know whether an observed default effect reflects a welfare-relevant preference or mistake. Within broad class of models, we find that determining impossible without resolving this ambiguity. Depending on resolution, tends in opposite directions: either minimizing number nondefault choices inducing active choice. show how these considerations depend choosers make mistakes selecting among options. illustrate our results using data pension contribution defaults.