Status quo bias

Status quo bias is an emotional bias; a preference for the current state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss. Status quo bias should be distinguished from a rational preference for the status quo ante, as when the current state of affairs is objectively superior to the available alternatives, or when imperfect information is a significant problem. A large body of evidence, however, shows that status quo bias frequently affects human decision-making.

Status quo bias interacts with other non-rational cognitive processes such as loss aversion, existence bias, endowment effect, longevity, mere exposure, and regret avoidance. Experimental evidence for the detection of status quo bias is seen through the use of the reversal test. A vast amount of experimental and field examples exist. Behavior in regard to retirement plans, health, and ethical choices show evidence of the status quo bias.

Examples

Kahneman, Thaler, and Knetsch created experiments that could produce this effect reliably.[1] Samuelson and Zeckhauser (1988) demonstrated status quo bias using a questionnaire in which subjects faced a series of decision problems, which were alternately framed to be with and without a pre-existing status quo position. Subjects tended to remain with the status quo when such a position was offered to them.[2]

Hypothetical Choice Tasks: Subjects were given a hypothetical choice task in the following "neutral" version, in which no status quo was defined: "You are a serious reader of the financial pages but until recently you have had few funds to invest. That is when you inherited a large sum of money from your great-uncle. You are considering different portfolios. Your choices are to invest in: a moderate-risk company, a high-risk company, treasury bills, municipal bonds." Other subjects were presented with the same problem but with one of the options designated as the status quo. In this case, the opening passage continued: "A significant portion of this portfolio is invested in a moderate risk company . . . (The tax and broker commission consequences of any changes are insignificant.)" The result was that an alternative became much more popular when it was designated as the status quo.[2]

Electric Power Consumers: California electric power consumers were asked about their preferences regarding trade-offs between service reliability and rates. The respondents fell into two groups, one with much more reliable service than the other. Each group was asked to state a preference among six combinations of reliability and rates, with one of the combinations designated as the status quo. A strong bias to the status quo was observed. Of those in the high-reliability group, 60.2 percent chose the status quo, whereas a mere 5.7 percent chose the low-reliability option that the other group had been experiencing, despite its lower rates. Similarly, of those in the low reliability group, 58.3 chose their low-reliability status quo, and only 5.8 chose the high-reliability option.[3]

Automotive Insurance Consumers and Other Examples: The US states of New Jersey and Pennsylvania inadvertently ran a real-life experiment providing evidence of status quo bias in the early 1990s. As part of tort law reform programs, citizens were offered two options for their automotive insurance: an expensive option giving them full right to sue and a less expensive option with restricted rights to sue. In New Jersey the cheaper option was the default and most citizens selected it. Only a minority chose the cheaper option in Pennsylvania, where the more expensive option was the default. Similar effects have been shown for contributions to retirement plans, choice of internet privacy policies and the decision to become an organ donor.

Explanations

Status quo bias has been attributed to a combination of loss aversion and the endowment effect, two ideas relevant to prospect theory. An individual weighs the potential losses of switching from the status quo more heavily than the potential gains; this is due to the prospect theory value function being steeper in the loss domain.[2] As a result, the individual will prefer not to switch at all. In other words, we tend to oppose change unless the benefits outweigh the risks. However, the status quo bias is maintained even in the absence of gain/loss framing: for example, when subjects were asked to choose the colour of their new car, they tended towards one colour arbitrarily framed as the status quo.[2] Loss aversion, therefore, cannot wholly explain the status quo bias,[4] with other potential causes including regret avoidance,[4] transaction costs[5] and psychological commitment.[2]

Rational routes to status quo maintenance

A status quo bias can also be a rational route if there are cognitive or informational limitations.

Informational limitations

Decision outcomes are rarely certain, nor is the utility they may bring. Because some errors are more costly than others (Haselton & Nettle, 2006),[6] sticking with what worked in the past is a safe option, as long as previous decisions are ‘‘good enough’'.[7]

Cognitive limitations

Choice is often difficult,[8] and decision makers may prefer to do nothing [9] and ⁄ or to maintain their current course of action because it is easier.[2] Status quo alternatives often require less mental effort to maintain (Eidelman & Crandall, 2009).

Irrational routes to the status quo bias

The irrational maintenance of the status quo bias links and confounds many cognitive biases.

Existence bias

An assumption of longevity and goodness are part of the status quo bias. People treat existence as a prima facie case for goodness, aesthetic and Longevity increases this preference.[10] The status quo bias affects people’s preferences; people report preferences for what they are likely rather than unlikely to receive. People simply assume, with little reason or deliberation, the goodness of existing states.[10]

Longevity is a corollary of the existence bias: if existence is good, longer existence should be better. This thinking resembles quasi-evolutionary notions of ‘‘survival of the fittest,’’ and also the augmentation principle in attribution theory.[11]

Inertia is another reason used to explain a bias towards the status quo. Another explanation is fear of regret in making a wrong decision, i.e. If we choose a partner, when we think there could be someone better out there.[12]

Mere exposure

Mere exposure is an explanation for the status quo bias. Existing states are encountered more frequently than non-existent states and because of this they will be perceived as more true and evaluated more preferably. One way to increase liking for something is repeated exposure over time.[13]

Loss aversion

Loss aversion also leads to greater regret for action than for inaction;[14] more regret is experienced when a decision changes the status quo than when it maintains it.[15] Together these forces provide an advantage for the status quo; people are motivated to do nothing or to maintain current or previous decisions.[2] Change is avoided, and decision makers stick with what has been done in the past.

Changes from the status quo will typically involve both gains and losses, with the change having good overall consequences if the gains outweigh these losses. A tendency to overemphasize the avoidance of losses will thus favor retaining the status quo, resulting in a status quo bias. Even though choosing the status quo may entail forfeiting certain positive consequences, when these are represented as forfeited "gains" they are psychologically given less weight than the "losses" that would be incurred if the status quo were changed.[16]

Omission bias

Omission bias may account for some of the findings previously ascribed to status quo bias. Omission bias is diagnosed when a decision maker prefers a harmful outcome that results from an omission to a less harmful outcome that results from an action (; Ilana Ritov and Jonathan Baron, "Status-Quo and Omission Biases," Journal of Risk and Uncertainty 5 [1992]: 49–61).

Detection

The Reversal Test: When a proposal to change a certain parameter is thought to have bad overall consequences, consider a change to the same parameter in the opposite direction. If this is also thought to have bad overall consequences, then the onus is on those who reach these conclusions to explain why our position cannot be improved through changes to this parameter. If they are unable to do so, then we have reason to suspect that they suffer from status quo bias. The rationale of the Reversal Test is: if a continuous parameter admits of a wide range of possible values, only a tiny subset of which can be local optima, then it is prima facie implausible that the actual value of that parameter should just happen to be at one of these rare local optima.[16]

Neural Activity

A study found that erroneous status quo rejections have a greater neural impact than erroneous status quo acceptances. This asymmetry in the genesis of regret might drive the status quo bias on subsequent decisions.[17]

A study was done using a visual detection task in which subjects tended to favor the default when making difficult, but not easy, decisions. This bias was suboptimal in that more errors were made when the default was accepted. A selective increase in subthalamic nucleus (STN) activity was found when the status quo was rejected in the face of heightened decision difficulty. Analysis of effective connectivity showed that inferior frontal cortex, a region more active for difficult decisions, exerted an enhanced modulatory influence on the STN during switches away from the status quo.[18]

Research by University College London scientists that examines the neural pathways involved in 'status quo bias' in the human brain and found that the more difficult the decision we face, the more likely we are not to act. The study, published in Proceedings of the National Academy of Sciences (PNAS), looked at the decision-making of participants taking part in a tennis 'line judgement' game while their brains were scanned using functional MRI (fMRI). The 16 study participants were asked to look at a cross between two tramlines on a screen while holding down a 'default' key. They then saw a ball land in the court and had to make a decision as to whether it was in or out. On each trial, the computer signalled which was the current default option – 'in' or 'out'. The participants continued to hold down the key to accept the default and had to release it and change to another key to reject the default. The results showed a consistent bias towards the default, which led to errors. As the task became more difficult, the bias became even more pronounced. The fMRI scans showed that a region of the brain known as the subthalamic nucleus (STN) was more active in the cases when the default was rejected. Also, greater flow of information was seen from a separate region sensitive to difficulty (the prefrontal cortex) to the STN. This indicates that the STN plays a key role in overcoming status quo bias when the decision is difficult.[18]

Behavioral Economics and the Default position

Against this background, two behavioral economists devised an opt-out plan to help employees of a particular company build their retirement savings. In an opt-out plan, the employees are automatically enrolled unless they explicitly ask to be excluded. They found evidence for status quo bias and other associated effects. They also noted that changing the default alternatives has, in some instances, been shown to have dramatic effects on people’s choices.[19]

Conflict

Status-quo educational bias can be both a barrier to political progress and a threat to the state's legitimacy/ argue that the values of stability, compliance, and patriotism underpin important reasons for status quo bias that appeal not to the substantive merits of existing institutions but merely to the fact that those institutions are the status quo[20]

Relevant fields

The Status quo bias is seen in important real life decisions; it has been found to be prominent is data on selections of health care plans and retirement programs.[2]

Politics

Preference for the status quo represents a core component of conservative ideology because conserving the current state affairs is one significant element of conservative ideology, the bias in its favour plays a role – under certain conditions – in promoting political conservatism.[10]

Ethics

Status quo bias may be responsible for much of the opposition to human enhancement in general and to genetic cognitive enhancement in particular.[16] Some ethicists argue, however, that status quo bias may not be irrational in such cases.[21] The rationality of status quo bias is also an important question in the ethics of disability.[22]

Education

Education can (sometimes unintentionally) encourage children’s belief in the substantive merits of a particular existing law or political institution, where the effect does not derive from an improvement in their ability or critical thinking about that law or institution. However, this biasing effect is not automatically illegitimate or counterproductive: a balance between social inculcation and openness needs to be maintained.[20]

Reading in schools within the elementary classroom, reading aloud sessions that exclude ethnically diverse materials create a bias in favor of the status quo that is harmful to children's education.[23]

Health

An experiment to determine if status-quo bias—bias toward current medication even when better alternatives are offered—exists in a stated-choice study among asthma patients who take prescription combination maintenance medications. The results of this study indicate that the status quo bias may exist in stated-choice studies, especially with medications that patients have to take daily such as asthma maintenance medications. Stated-choice practitioners should include a current medication in choice surveys to control for this bias.[24]

Retirement plans

An example of the status quo bias affecting retirement plans is a study done that examined the U.S. equity mutual fund. They found that people maintained the plan they had previously, even if it was no longer the optimal choice.[25]

See also

References

  1. ↑ Kahneman, D.; Knetsch, J. L.; Thaler, R. H. (1991). "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias". Journal of Economic Perspectives. 5 (1): 193–206. doi:10.1257/jep.5.1.193.
  2. 1 2 3 4 5 6 7 8 Samuelson, W.; Zeckhauser, R. (1988). "Status quo bias in decision making". Journal of Risk and Uncertainty. 1: 7–59. doi:10.1007/bf00055564.
  3. ↑ Hartman, Raymond S.; Chi-Keung Woo (1991). "Consumer Rationality and the Status Quo". Quarterly Journal of Economics. 106: 141–162. doi:10.2307/2937910.
  4. 1 2 Korobkin, R. (1997). "The status quo bias and contract default rules" (PDF). Cornell Law Review. 83: 608–687. SSRN 52240Freely accessible.
  5. ↑ Tversky, A.; Kahneman, D. (1991). "Loss aversion in riskless choice: a reference-dependent model". The Quarterly Journal of Economics. 106 (4): 1039–1061. doi:10.2307/2937956.
  6. ↑ Haselton, Martie G.; Nettle, Daniel (2006). "The Paranoid Optimist: An Integrative Evolutionary Model of Cognitive Biases" (PDF). Personality and Social Psychology Review. 10 (1): 47–66. doi:10.1207/s15327957pspr1001_3. PMID 16430328.
  7. ↑ Simon, H.A. (March 1956). "Rational Choice and the Structure of the Environment". Psychological Review. 63 (2): 129–138. doi:10.1037/h0042769.
  8. ↑ Iyengar, Sheena; Lepper, Mark R (December 2000). "When choice is demotivating: Can one desire too much of a good thing?". Journal of Personality and Social Psychology. 79 (6): 995–1006. doi:10.1037/0022-3514.79.6.995.
  9. ↑ Baron, Jonathan; Ilana Ritov (2004). "Omission bias, individual differences, and normality". Organizational Behavior and Human Decision Processes. 94: 74–85. doi:10.1016/j.obhdp.2004.03.003.
  10. 1 2 3 Eidelman, Scott; Crandall, Christian S. (2012). "Bias in Favor of the Status Quo". Social and Personality Psychology Compass. 6 (3): 270–281. doi:10.1111/j.1751-9004.2012.00427.x.
  11. ↑ Kelley, Harold H. (1971). Attribution in Social Interaction. General Learning Press.
  12. ↑ Venkatesh, B. "Benefitting from status quo bias".
  13. ↑ Bornstein, R.F. (1989). "Exposure and affect: Overview and meta- analysis of research". Psychological Bulletin. 106: 265–289. doi:10.1037/0033-2909.106.2.265.
  14. ↑ Kahneman, Daniel; Slovic, Paul; Tversky, Amos (1982). Judgment Under Uncertainty: Heuristics and Biases. Cambridge University Press. ISBN 978-0-521-28414-1.
  15. ↑ Inman, J.J.; Zeelenberg (2002). "Regret repeat versus switch decisions: The attenuation role of decision justifiability". Journal of Consumer Research. 29: 116–128. doi:10.1086/339925.
  16. 1 2 3 Bostrom, Nick; Ord, Toby (2006). "The Reversal Test: Eliminating Status Quo Bias in Applied Ethics". Ethics. 116 (4): 656–679. doi:10.1086/505233.
  17. ↑ Nicolle, A.; Fleming, S. M.; Bach, D. R.; Driver, J.; Dolan, R. J. (2011). "A Regret-Induced Status Quo Bias". Journal of Neuroscience. 31 (9): 3320–3327. doi:10.1523/JNEUROSCI.5615-10.2011.
  18. 1 2 Fleming, Stephen; C. Thomas; R. Dolan (February 2010). "Overcoming Status Quo Bias in the Human Brain". Proceedings of the National Academy of Sciences of the United States of America. 107 (13): 6005–6009. doi:10.1073/pnas.0910380107.
  19. ↑ Thaler, Richard H.; Shlomo Benartzi (2004). "Save More Tomorrow: Using Behavioural Economics to Increase Employee Saving". Journal of Political Economy. 112: 164–187. doi:10.1086/380085.
  20. 1 2 MacMullen (2011). "On Status-Quo Bias in Civic Education". Journal of Politics. 73 (3): 872–886. doi:10.1017/s0022381611000521.
  21. ↑ Nebel, Jacob (2015). "Status Quo Bias, Rationality, and Conservatism about Value". Ethics. 125 (2): 449–476. doi:10.1086/678482.
  22. ↑ Wasserman, David (2015). "Disability, Diversity, and Preference for the Status Quo: Bias or Justifiable Preference?". American Journal of Bioethics. 15 (6): 11–12. doi:10.1080/15265161.2015.1028676.
  23. ↑ Gonzalez-Jensen, Margarita; Sadler, Norma (April 1997). "Behind Closed Doors: Status Quo Bias in Read Aloud Selections". Equity & Excellence in Education. 30 (1): 27–31. doi:10.1080/1066568970300104.
  24. ↑ Mohamed, AF; Hauber, AB; Johnson, FR; Meddis, D; Wagner, S (2008). "Status Quo Bias in Stated Choice Studies: Is it Real?". Value in Health. 11 (6): A567–A568. doi:10.1016/S1098-3015(10)66867-2.
  25. ↑ Kempf, Alexandre; Stefan Ruenzi (2006). "Status Quo Bias and the Number of Alternatives: An Empirical Illustration from the Mutual Fund Industry". Journal of Behavioral Finance. 7 (4): 204–213. doi:10.1207/s15427579jpfm0704_3.

Further reading

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