Rational status quo

Itzhak Gilboa and Fan Wang

Journal of Economic Theory, 2019, vol. 181, issue C, 289-308

Abstract: Decision makers often stick to a status quo without explicitly reconsidering it. Yet, their observed choices might be compatible with a fully rational model. We ask when such a rationalization is possible. We assume as observable only the choice of sticking to the status quo vs. changing it, as a function of a database of cases. We state conditions on the set of databases that would make the decision maker change the status quo, which are equivalent to the following representation: the decision maker entertains a set of theories, of which one is that her current choice is the best; she is inert as long as that theory beats any alternative theory according to a maximum likelihood criterion.

Keywords: Case-based decisions; Status quo; System 1; System 2; Inertia (search for similar items in EconPapers)
JEL-codes: D80 D91 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:181:y:2019:i:c:p:289-308

DOI: 10.1016/j.jet.2019.02.009

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