We report on an experiment examining why default options impact
behavior. By randomly assigning employees to different varieties
of a salary-linked savings account, we find that default enrollment
increases participation by 40 percentage points—an effect equivalent
to providing a 50 percent matching incentive. We then use a series of
experimental interventions to differentiate between explanations for
the default effect, which we conclude is driven largely by present-biased
preferences and the cognitive cost of thinking through different
savings scenarios. Default assignment also changes employees’ attitudes
toward saving, and makes them more likely to actively decide
to save after the study conclude