Reference-Dependent Procedural Decision Making∗

We derive, by using the revealed preference method, an individual decision making model that allows for an agent not only to exhibit status quo bias, but also to make use of her default option as a reference point. The resulting model contains elements of the classical rational choice model — indeed it reduces to that model in the case of choice problems without default options — but can also be viewed as arising from a basic choice procedure that involves multiple objectives. Another important feature of the model is that, while it permits status quo bias, it does not necessarily lead to the overvaluation of one’s endowment, and hence it is duly consistent with the absence of a gap between one’s willingness to sell and buy a given choice alternative. JEL Classification: D11, D81.