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Status quo bias, multiple priors and uncertainty aversion

  • Ortoleva, Pietro

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.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 69 (2010)
Issue (Month): 2 (July)
Pages: 411-424

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Handle: RePEc:eee:gamebe:v:69:y:2010:i:2:p:411-424
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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