Ortoleva, Pietro (2008): Status Quo Bias, Multiple Priors and Uncertainty Aversion.
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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 the agent for each possible status quo option, and provide a characterization according to which the agent prefers her status quo act if nothing better is feasible for a given set of possible 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. Finally, we apply the model to a ﬁnancial choice problem and show that the presence of status quo bias as modeled here might induce the presence of a risk premium even with risk neutral agents.
|Item Type:||MPRA Paper|
|Original Title:||Status Quo Bias, Multiple Priors and Uncertainty Aversion|
|Keywords:||Status quo bias, Ambiguity Aversion, Endowment Eﬀect, Risk Premium|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
|Depositing User:||Pietro Ortoleva|
|Date Deposited:||17. Dec 2008 18:59|
|Last Modified:||12. Feb 2013 04:15|
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