Status Quo Bias in Large and Small Choice Sets∗

This paper introduces models of status quo bias based on the concept of decision avoidance, by which a decision maker may select the status quo in order to avoid a difficult decision. These models capture the experimental finding that the status quo is more frequently chosen in larger choice sets. This phenomenon violates the predictions of current preference-based models of status quo bias that assume a decision maker with a fixed status quo will make consistent choices. Using laboratory experiments, I show that subjects in large choice sets do exhibit behavior in line with decision avoidance, while in small choice sets, preference-based models offer a better explanation of behavior. These findings raise questions for advocated policies of “benign paternalism.” ∗I would like to thank Andrew Caplin, Sheena Iyengar, Andrew Schotter and Efe Ok for the invaluable help they have provided during the course of this project. I would also like to thank John Remarek for his practical help, and Daniel Martin for his exceptional work in designing the experimental interface used in this paper. Finally, I would like to thank seminar participants at New York University for their valuable comments and encouragement. †Correspondence email: [email protected]