Status quo bias, multiple priors and uncertainty aversion

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.