Loss Aversion and Status-Quo Label Bias
It has been noted and demonstrated that people are reluctant to make changes in their current state (called the status quo bias, Samuelson & Zeckhauser, 1988), and to trade objects they own (called the endowment effect, Thaler, 1980). This reluctance has been explained by a combination of loss aversion and reference dependence which causes the status quo to appear better than its alternative, ceteris paribus. In the present study, respondents were asked to rate the attractiveness of various policies, and to list their pros and cons. We find that just labeling some state of affairs status quo enhances its rating (which we call the status quo label bias); namely, a policy seemed more attractive to respondents who thought it is the status quo than to those who did not. An analysis of the listed pros and cons provides evidence that a model of the balance of a policy's pros and cons is a good predictor of that policy's attractiveness. Rendering the pros and cons in terms of losses and gains provides evidence that losses do, indeed, loom larger than gains. When put together, our results provide an empirical grounding for the loss aversion explanation of the status quo bias.
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- Strahilevitz, Michal A & Loewenstein, George, 1998. " The Effect of Ownership History on the Valuation of Objects," Journal of Consumer Research, University of Chicago Press, vol. 25(3), pages 276-89, December.
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- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Ritov, Ilana & Baron, Jonathan, 1992. " Status-Quo and Omission Biases," Journal of Risk and Uncertainty, Springer, vol. 5(1), pages 49-61, February.
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