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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.

Suggested Citation

  • Vega-Redondo, Fernando, 1995. "The Dynamics and Revealed Preference of Status-Quo Optimality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(2), pages 263-282, July.
    • Handle: RePEc:spr:joecth:v:6:y:1995:i:2:p:263-82
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    Cited by:

    1. Raphaël Giraud, 2012. "Money matters: an axiomatic theory of the endowment effect," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 303-339, June.
    2. Kets, W., 2008. "Networks and learning in game theory," Other publications TiSEM 7713fce1-3131-498c-8c6f-3, Tilburg University, School of Economics and Management.
    3. Kets, W. & Voorneveld, M., 2005. "Learning to be Prepared," Discussion Paper 2005-117, Tilburg University, Center for Economic Research.
    4. Theodore Turocy, 2007. "On the sufficiency of transitive preferences," Economics Bulletin, AccessEcon, vol. 4(22), pages 1-9.
    5. repec:ebl:ecbull:v:4:y:2007:i:22:p:1-9 is not listed on IDEAS

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