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The Dynamics and Revealed Preference of Status-Quo Optimality

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  • Vega-Redondo, Fernando

Abstract

In a preceding companion paper, a static model of individual decision making was proposed that, due to imprecise perceptions, induces simple and inertial behavior at equilibrium ("status-quo optimal") points. This paper addresses two complementary issues. Firstly, it studies the learning dynamics induced by the model and shows that its well-defined limit behavior ranges from status-quo optimal to fully optimal, depending on the underlying features of the problem. Secondly, the paper characterizes the behavioral implications of the model and compares them with those derived from standard decision-theoretic frameworks. Specifically, it is shown that, from a Revealed-Preference perspective, status-quo optimal behavior may be identified with that rationalizable by an acyclic preference relation, possibly intransitive.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 6 (1995)
Issue (Month): 2 (July)
Pages: 263-82

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Handle: RePEc:spr:joecth:v:6:y:1995:i:2:p:263-82

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Cited by:
  1. Kets, W., 2008. "Networks and Learning in Game Theory," Open Access publications from Tilburg University urn:nbn:nl:ui:12-378199, Tilburg University.
  2. Kets, W. & Voorneveld, M., 2005. "Learning to be Prepared," Discussion Paper 2005-117, Tilburg University, Center for Economic Research.
  3. Raphaƫl Giraud, 2012. "Money matters: an axiomatic theory of the endowment effect," Economic Theory, Springer, vol. 50(2), pages 303-339, June.
  4. repec:ebl:ecbull:v:4:y:2007:i:22:p:1-9 is not listed on IDEAS

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