Journal
JOURNAL OF ECONOMIC THEORY
Volume 121, Issue 1, Pages 1-29Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.jet.2004.03.007
Keywords
revealed preferences; incomplete preferences; status quo bias; endowment effect; expected utility; overpricing; preference reversal phenomenon
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Motivated by the empirical findings concerning the importance of one's current situation on her choice behavior, the main objective of this paper is to propose a rational choice theory that allows for the presence of a status quo bias, and that incorporates the standard choice theory as a special case. We follow a revealed preference approach, and obtain two nested models of rational choice that allow phenomena like the status quo bias and the endowment effect, and that are applicable in any choice situation to which the standard (static) choice model applies. (C) 2004 Published by Elsevier Inc.
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