Status quo bias, multiple priors and uncertainty aversion
- Creators
- Ortoleva, Pietro
Abstract
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.
Additional Information
© 2009 Elsevier. Received 25 September 2008. Available online 11 December 2009. I would like to thank Heski Bar-Isaac, Paolo Ghirardato, Massimo Marinacci, Yusufcan Masatlioglu, David Pearce, Debraj Ray, Tom Sargent, the participants at seminars at NYU, at RUD 2007 at Tel Aviv University, at The Conference on Game Theory at Stony Brook, an anonymous referee and especially Efe Ok and Gil Riella for extremely useful comments and suggestions.Additional details
- Eprint ID
- 20264
- DOI
- 10.1016/j.geb.2009.11.007
- Resolver ID
- CaltechAUTHORS:20101004-082123852
- Created
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2010-10-05Created from EPrint's datestamp field
- Updated
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2021-11-08Created from EPrint's last_modified field