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Consumer Rationality and the Status Quo

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Author Info
Hartman, Raymond S
Doane, Michael J
Woo, Chi-Keung
Abstract

Received microeconomic theory presumes rational consumers maximize utility over all commodity bundles. Recent analysis, however, suggests that a consumer's status quo may limit economic rationality, "bias" consumer decisions, and induce serious errors in survey-based valuations of public and private goods. Using regression and choice-theoretic frameworks, the authors investigate the existence of status quo effects in the consumer valuation of a particular unpriced product--the reliability of residential electrical service. Such valuations have become important in electric utility resource planning and rate making. They find substantial status quo effects, which must be addressed in welfare comparisons regarding electric service reliability. Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 106 (1991)
Issue (Month): 1 (February)
Pages: 141-62
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Handle: RePEc:tpr:qjecon:v:106:y:1991:i:1:p:141-62

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  2. Einat Neuman & Shoshona Neuman, 2008. "Reference-dependent preferences and loss aversion: A discrete choice experiment in the health-care sector," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3, pages 162-173, February. [Downloadable!]
  3. Thomas A. Rietz, 1991. "Arbitrage," Discussion Papers 958, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  4. Einat Neuman & Shoshana Neuman, 2007. "Reference-Dependent Preferences and Loss Aversion: A Discrete Choice Experiment in the Health-Care Sector," IZA Discussion Papers 3238, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Patricio Santiago Dalton, 2003. "What have we learnt about Loss Aversion and Endowment Effects? Still an anomaly?," Microeconomics 0307005, EconWPA. [Downloadable!]
  6. Carol Mansfield, 1999. "Despairing Over Disparities: Explaining the Difference Between Willingness to Pay and Willingness to Accept," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(2), pages 219-234, March. [Downloadable!] (restricted)
  7. von Haefen, Roger H. & Adamowicz, Wiktor L., 2003. "Not Playing The Game: Non-Particpation In Repeated Discrete Choice Models," 2003 Annual meeting, July 27-30, Montreal, Canada 22037, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  8. Alberto Longo & Anil Markandya & Marta Petrucci, 2006. "The Internalization of Externalities in The Production of Electricity: Willingness to Pay for the Attributes of a Policy for Renewable Energy," Working Papers 2006.132, Fondazione Eni Enrico Mattei. [Downloadable!]
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  9. Ortoleva, Pietro, 2008. "Status Quo Bias, Multiple Priors and Uncertainty Aversion," MPRA Paper 12243, University Library of Munich, Germany. [Downloadable!]
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