The Effect of Ambiguity on Status Quo Bias: An Experimental Study

We conduct an experiment to determine the effect of ambiguity on status quo bias. We find no evidence of the bias in the absence of ambiguity and when ambiguity is present both in the status quo option and the alternative. We do find evidence for status quo bias under asymmetric presence of ambiguity, i.e. when the status quo option is non-ambiguous and the alternative is, or when the status quo option is ambiguous and the alternative is not. These findings are not predicted by the existing models of choice with initial endowment, such as the loss aversion model by Kahneman and Tversky (1979) and the incomplete preferences model by Bewley (1986). Our results, combined with the evidence from the endowment effect literature, suggest that dissimilarity between options may be an important determinant of the status quo bias.