Abstract
Motivated by the extensive evidence about the relevance of status quo bias both in experiments and in real markets, we study this phenomenon from a decision-theoretic prospective, focusing on the case of preferences under uncertainty. We develop an axiomatic framework that takes as a primitive the preferences of an agent for each possible status quo option, and provide a characterization according to which the agent considers a full-dimensional set of possible priors and abandons her status quo option only if she finds an alternative that returns a higher expected utility for each of these priors. We then show that, in this framework, the very presence of a status quo induces the agent to be more uncertainty averse than she would be without a status quo option.
Original language | English (US) |
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Pages (from-to) | 411-424 |
Number of pages | 14 |
Journal | Games and Economic Behavior |
Volume | 69 |
Issue number | 2 |
DOIs | |
State | Published - Jul 2010 |
Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Finance
- Economics and Econometrics
Keywords
- Ambiguity aversion
- Endowment effect
- Status quo bias