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Status Quo Bias and the Decoy Effect: A Comparative Analysis in Choice under Risk


  • Miguel Costa-Gomes
  • Georgios Gerasimou


Inertia and context-dependent choice effects are well-studied classes of behavioural phenomena. While much is known about these effects in isolation, little is known about whether one of them "dominates" the other when both can potentially be present. Knowledge of any such dominance is relevant for effective choice architecture and descriptive modelling. We initiate this empirical investigation with a between-subjects lab experiment that featured a single decision over two or three money lotteries. Our experiment was designed to test for dominance between *status quo bias* and the *decoy effect*. We find strong evidence for status quo bias and no evidence for the decoy effect. We also find that status quo bias is powerful enough so that, at the aggregate level, a fraction of subjects switch from being risk-averse to being risk-seeking. Survey evidence suggests that this is due to subjects focusing on the maximum possible amount when the risky lottery is the default and on the probability of winning more than the smallest amount when there is no default lottery. The observed reversal in risk attitudes is explainable by a large class of reference-dependent preferences.

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  • Miguel Costa-Gomes & Georgios Gerasimou, 2020. "Status Quo Bias and the Decoy Effect: A Comparative Analysis in Choice under Risk," Papers 2006.14868,, revised Oct 2020.
  • Handle: RePEc:arx:papers:2006.14868

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    References listed on IDEAS

    1. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1133-1165.
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    9. Amnon Maltz & Giorgia Romagnoli, "undated". "Status Quo Bias under Uncertainty: An Experimental Study," Working Papers WP2017/6, University of Haifa, Department of Economics.
    10. Alireza Soltani & Benedetto De Martino & Colin Camerer, 2012. "A Range-Normalization Model of Context-Dependent Choice: A New Model and Evidence," PLOS Computational Biology, Public Library of Science, vol. 8(7), pages 1-15, July.
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