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Rational status quo

Author

Listed:
  • Gilboa, Itzhak
  • Wang, Fan

Abstract

Decision makers often stick to a status quo without explicitly reconsidering it. Yet, their observed choices might be compatible with a fully rational model. We ask when such a rationalization is possible. We assume as observable only the choice of sticking to the status quo vs. changing it, as a function of a database of cases. We state conditions on the set of databases that would make the decision maker change the status quo, which are equivalent to the following representation: the decision maker entertains a set of theories, of which one is that her current choice is the best; she is inert as long as that theory beats any alternative theory according to a maximum likelihood criterion.

Suggested Citation

  • Gilboa, Itzhak & Wang, Fan, 2019. "Rational status quo," Journal of Economic Theory, Elsevier, vol. 181(C), pages 289-308.
    • Handle: RePEc:eee:jetheo:v:181:y:2019:i:c:p:289-308
    DOI: 10.1016/j.jet.2019.02.009
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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