Status quo bias

A status quo bias or default bias is a cognitive bias which results from a preference for the maintenance of one's existing state of affairs.

Status quo bias should be distinguished from a rational preference for the status quo, as for when the current state of affairs is more beneficial than 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 should also be distinguished from psychological inertia, which refers to a lack of intervention in the current course of affairs.

The bias intersects with other non-rational cognitive processes such as loss aversion, in which losses comparative to gains are weighed to a greater extent.

Experiments have also been conducted on the effect of status quo bias on contributions to retirement plans and Fevrier & Gay (2004) study on status quo bias in organ donations consent.

Questionnaire: 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. Results of the experiment further show that status quo bias advantage relatively increases with the number of alternatives given within the choice set. Furthermore, a weaker bias resulted from when the individual exhibited a strong discernible preference for a chosen alternative.

Automotive insurance consumers: 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 insurance was the default and in Pennsylvania the expensive insurance was the default. Johnson, Hershey, Meszaros and Kunreuther (1993) conducted a questionnaire to test whether consumers will stay with the default option for car insurance. They found that only 20% of New Jersey drivers changed from the default option and got the more expensive option. Also, only 25% of Pennsylvanian drivers changed from the default option and got the cheaper insurance. Therefore, framing and status quo bias can have significant financial consequences.

General practitioners: Boonen, Donkers and Schut created two discrete choice experiments for Dutch residents to conclude a consumer's preference for general practitioners and whether they would leave their current practitioner. The Dutch health care system was chosen as general practitioners play the role of a gatekeeper. The experiment was conducted to investigate the effect of status quo bias on a consumer's decision to leave their current practitioner, with knowledge of other practitioners and their current relationship with their practitioner determining the role status quo bias plays.

Through the questionnaire it was shown that respondents were aware of the lack of added benefit aligned with their current general practitioner and were aware of the quality differences between potential practitioners. 35% of respondents were willing to a pay a copayment to stay with their current general practitioner, while only 30% were willing to switch to another practitioner in exchange for a financial gain. These consumers were willing to pay a considerable amount to continue going to their current practitioner up to €17.32. For general practitioners the value assigned by the consumer to staying with their current one exceeded the total value assigned to all other attributes tested such as discounts or a certificate of quality. with other potential causes including regret avoidance, and psychological commitment. sticking with what worked in the past is a safe option, as long as previous decisions are "good enough".

;Cognitive limitations

Cognitive limitations of status quo bias involve the cognitive cost of choice, in which decisions are more susceptible to postponement as increased alternatives are added to the choice set. Moreover, mental effort needed to maintain status quo alternatives would often be lesser and easier, resulting in a superior choice's benefit being outweighed by decision-making cognitive costs. Consequently, maintenance of current or previous state of affairs would be regarded as the easier alternative.

Irrational routes

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.

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.

Psychological 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.

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.

;Loss aversion

Loss aversion also leads to greater regret for action than for inaction; more regret is experienced when a decision changes the status quo than when it maintains it. Together these forces provide an advantage for the status quo; people are motivated to do nothing or to maintain current or previous decisions.

The loss aversion explanation for the status quo bias has been challenged by David Gal and Derek Rucker who argue that evidence for loss aversion (i.e., a tendency to avoid losses more than to pursue gains) is confounded with a tendency towards inertia (a tendency to avoid intervention more than to intervene in the course of affairs). Inertia, in this sense, is related to omission bias, except it need not be a bias but might be perfectly rational behavior stemming from transaction costs or lack of incentive to intervene due to fuzzy preferences.

;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.

Overall implications of a study conducted by Ilana Ritov and Jonathan Baron, regarding status quo and omission biases, reveal that omission bias may further be diagnosed when the decision maker is unwilling to take preference from any of the available options given to them, thus enabling reduction of the number of decisions where utility comparison and weight is unavoidable.

A study was done using a visual detection task in which subjects tended to favour 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 sub-thalamic 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.

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. The impact of defaults on decision making due to status quo bias is not purely due to subconscious bias, as it has been found that even when disclosing the intent of the default to consumers, the effect of the default is not reduced.

An experiment conducted by Sen Geng, regarding status quo bias and decision time allocation, reveal that individuals allocate more attention to default options in comparison to alternatives. This is due to individuals who are mainly risk-averse who seek to attain greater expected utility and decreased subjective uncertainty in making their decision. Furthermore, by optimally allocating more time and asymmetric attention to default options or positions, the individual's estimate of the default's value is consequently more precise than estimates of alternatives. This behaviour thus reflects the individual's asymmetric choice error, and is therefore an indication of status quo bias.

Conflict

Status-quo educational bias can be both a barrier to political progress and a threat to the state's legitimacy and 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.

Relevant fields

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

Ethics

Status quo bias may be responsible for much of the opposition to human enhancement in general and to genetic cognitive enhancement in particular. The rationality of status quo bias is also an important question in the ethics of disability.

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.

Retirement plans

A study in 1986 examined the effect of status quo bias on those planning their retirement savings when given the yearly choice between two investment funds. Participants were able to choose how to proportionally split their retirement savings between the two funds at the beginning of each year. After each year, they were able to amend their chose split without switching costs as their preferences changed. Even though the two funds had vastly different returns in both absolute and relative terms, the majority of participants never switched the preferences across the trial period. Status quo bias was also more evident in older participants as they preferred to stay with their original investment, rather than switching as new information came to light.

In negotiation

Korobkin's has studied a link between negotiation and status quo bias in 1998. In this studies shows that in negotiating contracts favor inaction that exist in situations in which a legal standard and defaults from contracts will administer absent action. This involves a biased opinion opposed to alternative solutions. Heifetz's and Segev's study in 2004 found support for existence of a toughness bias. It is like so-called endowment effect which affects seller's behavior.

Price management

Status quo bias provides a maintenance role in the theory-practice gap in price management, and is revealed in Dominic Bergers' research regarding status quo bias and its individual differences from a price management perspective. He identified status quo bias as a possible influencer of 22 rationality deficits identified and explained by Rullkötter (2009), and is further attributed to deficits within Simon and Fassnacht's (2016) price management process phases. Status quo bias remained as an underlying possible cause of 16 of the 22 rationality deficits. Examples of these can be seen within the analysis phase and implementation phase of price management processes.

Bergers reveal that status quo bias within the former price management process phase potentially led to complete reliance on external information sources that existed traditionally. This bias, through a price management perspective, can be demonstrated when monitoring competitor's pricing. In the latter phase, status quo bias potentially led to the final price being determined by decentralised staff, which is potentially perpetuated by existing system profitability within price management practices. Using real data obtained from the U.S. mutual fund market, this study reveals status quo bias influences fund investors, in which a stronger correlation for positive dependence of status quo bias was found when the number of alternatives was larger, and therefore confirms Samuelson and Zeckhauser (1988) experimental results. Status quo bias is compounded by loss aversion theory where consumers see disadvantages as larger than advantages when making decision away from the reference point. Economics can also describe the effect of loss aversion graphically with a consumer's utility function for losses having a negative and 2 times steeper curve than the utility function for gains. Therefore, they perceive the negative effect of a loss as more significant and will stay with status quo. Consumers choosing the status quo goes against rational consumer choice theory as they are not maximising their utility. Rational consumer choice theory underpins many economic decisions by defining a set of rules for consumer behaviour. Therefore, status quo bias has substantial implications in economic theory.