Table 1
Summary of findings
Alternative
Risky
Ambiguous
Status Quo
Risky
NO BIAS
BIAS
Ambiguous
BIAS
NO BIAS
ous, or vice versa. Therefore, we find only partial support for Bewley’s suggested driving
force of inertia. As his theory predicts, choices are not biased towards the status quo when
ambiguity is absent, i.e., when all alternatives in the choice set are risky lotteries. Further
support comes from the two “asymmetric treatments”, when one option is risky and the
other ambiguous. In both treatments we find evidence for status quo biased behavior.
However, surprisingly, when even more ambiguity is added to the problem, and both the
status quo option and the alternative are ambiguous, we find that individuals behave as
rational decision makers, and do not exhibit status quo bias, in contrast to Bewley’s model.
Our findings are also difficult to reconcile with the loss aversion paradigm originally
introduced by Kahneman and Tversky (1979). According to this approach, an individual
evaluates outcomes relative to a reference point (which is typically taken to be his status quo
option, if present) and weighs losses more severely than commensurate gains. While loss
aversion accommodates many experimental irregularities, it does not predict our findings.
We further discuss loss aversion in Section 4, but the intuition is that the two main forces
at play, i.e., evaluation relative to a reference point and overweighting of losses, are present
to the same extent in all of our treatments and therefore cannot explain the heterogeneity
of our results.
4
The pattern we find is novel and it highlights a possible new determinant for the status
quo bias which is the dissimilarity between the status quo and the alternative option.
There are two reasons why dissimilarity may lead to status quo bias. The first is a shift
of preferences, not necessarily towards the status quo option but rather towards options
which are similar to it.
6
In our experiment, a risky endowment may shift preferences
towards risky prospects and, similarly, an ambiguous endowment may shift preferences in
the direction of ambiguous prospects. A shift of this sort may lead to status quo bias in
choices between an ambiguous and a risky prospect, but not in choices within the same
uncertainty type.
A second channel linking our findings to dissimilarity is decision avoidance, i.e., the
tendency to avoid making an active choice and thus maintaining the status quo. This
channel may be at play under the following two hypotheses: (i) active choices are more
often avoided when comparisons are difficult, and (ii) dissimilar options are more difficult
to compare than similar ones.
7
When options are easy to compare, the best one is readily
identified. In these circumstances, choices reflect standard decision making and the en-
dowment plays no role in the choice procedure. On the other hand, when comparisons
are more difficult, sticking to the current situation could be a natural way to avoid the
complications involved with identifying the best option.
8
Both channels come to play in a recent model developed by Maltz (2016). He partitions
6
Dean (2008) and Dean et al. (2017) find such preference shifts in choices between a risky and a
riskless prospect. Sprenger (2015) shows that the propensity to take up risk increases if the status quo is
risky, generating what he calls an endowment effect for risk. A similar mechanism may be at play in our
experiment, where we observe a shift of preferences in the direction of the status quo’s type of uncertainty.
7
The idea that similar alternatives may be easier to compare than dissimilar ones has been suggested
by Schwartz (2000). This intuition works particularly well in the context of our experiment, in which the
risky options all share a similar risk profile (they are all binary lotteries paying different prizes with equal
probabilities). Our ambiguous options are also all defined over a similar state space. Instead, the choice
between risky and ambiguous options presents a complex asymmetry in terms of the uncertainty involved.
8
Decision avoidance has also been used to explain why the status quo bias is more frequent in larger
choice sets (Dean, 2008; Dean et al., 2017).
5
the choice set into categories of goods which are similar to each other and studies the effect
of the endowment within and across categories. According to his approach, the decision
maker first focuses on the endowment’s category and designates the best alternative within
that set to act as his reference point. This step is in line with the first suggested explanation,
i.e., a shift of preferences towards options which are similar to the endowment. At the
second stage, this reference point induces a constrained set of feasible alternatives from
which the agent makes his final choice. The constraint is a psychological construct which
reflects decision avoidance - instead of making a choice between many alternatives or among
alternatives that are difficult to compare, the decision maker simplifies his choice problem
by excluding some options from further consideration. This model can rationalize our
findings in all four treatments as we illustrate in Section 4.
To the best of our knowledge, our study is the first to comprehensively examine the role
of different types of uncertainty on status quo bias. As far as we know, two of our treatments
(Risky-Ambiguous and Ambiguous-Ambiguous) have never been run before. Indeed, only
a handful of experiments have looked at the status quo bias in the uncertainty domain.
Dean (2008) uses risky lotteries to measure the effect of the size of the choice set on the
bias. His findings are complementary to ours as he reports low levels of status quo bias in
small choice sets. In fact, just like in our study, he finds no bias in binary choices among
risky lotteries. However, in his study, as the size of the choice set grows, the bias increases,
possibly through the channel of decision avoidance which may be the common link between
his findings and ours.
The closest experiment to ours is Roca et al. (2006), so far the only controlled ex-
periment on status quo bias involving ambiguity that we are aware of. They document
positive status quo bias when the endowment is an ambiguous gamble while the alternative
is risky, a finding which is consistent with our results in the treatment studying the same
6