Thinking Inside the Box: Status Quo Bias and Stochastic Consideration

25 Pages Posted: 5 Mar 2018

See all articles by Matthew Kovach

Matthew Kovach

Mitchell E. Daniels, Jr School of Business, Purdue University

Date Written: February 23, 2018

Abstract

This paper studies the effect of a status quo (SQ) on stochastic choice with limited consideration. I introduce and characterize the status quo dependent random consideration rule (SQ-RCR) from stochastic choice data with a known status quo and show that this model identifies three distinct channels through which the SQ affects choices: (1) the SQ is attention privileged and hence is always considered, (2) the SQ focuses attention on a subset of alternatives that dominate it, and (3) the SQ directs attention by influencing that probability with which an alternative is considered. When the SQ directs attention, becoming the SQ may in fact reduce an alternatives likelihood of being chosen, which is unique to this environment. I then characterize two special cases of the model that eliminate channels two and three, respectively. The model accounts for wide a variety of behavior, including choice frequency reversals, violations of stochastic transitivity, and the compromise and attraction effects. Finally, I relate to other models of stochastic choice including a generalized version of the random utility model.

Keywords: Random Choice, Status Quo Bias, Stochastic Consideration

Suggested Citation

Kovach, Matthew, Thinking Inside the Box: Status Quo Bias and Stochastic Consideration (February 23, 2018). Available at SSRN: https://ssrn.com/abstract=3129150 or http://dx.doi.org/10.2139/ssrn.3129150

Matthew Kovach (Contact Author)

Mitchell E. Daniels, Jr School of Business, Purdue University ( email )

403 Mitch Daniels Blvd.
West Lafayette, IN 47907
United States

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