Brown Bag Seminar : Hassan Nosratabadi

Dynamic Choice with Status Quo -   Theory and Design of Efficient Experiment

Hassan Nosratabadi, UCLouvain CORE

Abstract: We study a model of decision making in which choice situations come in a specific order and the decision maker displays the following status quo bias: she sticks to her previous choice whenever it is still available, except if a new alternative is obviously better. As a result, only changes in the chosen alternative along the choice sequence reveal preference. We show that the resulting dynamic status quo biased choice model is characterized by the strong axiom of revealed preferences along with the weak axiom of revealed obvious preferences. Finally, we show that, provided the number of alternatives is sufficiently large (at least 5 alternatives), the length of the minimal sequence of choice situations needed for extracting unique preferences is not larger under status quo bias than under rationality.