Most real decisions, unlike those of economics texts, have a status quo alternative-that is, doing nothing or maintaining one's current or previous decision. A series of decision-making experiments shows that individuals disproportionately stick with the status quo. Data on the selections of health plans and retirement programs by faculty members reveal that the status quo bias is substantial in important real decisions. Economics, psychology, and decision theory provide possible explanations for this bias. Applications are discussed ranging from marketing techniques, to industrial organization, to the advance of science."To do nothing is within the power of all men." Samuel JohnsonHow do individuals make decisions? This question is of crucial interest to researchers in economics, political science, psychology, sociology, history, and law. Current economic thinking embraces the concept of rational choice as a prescriptive and descriptive paradigm. That is, economists believe that economic agents-individuals, managers, government regulators-should (and in large part do) choose among alternatives in accordance with well-defined preferences.In the canonical model of decision making under certainty, individuals select one of a known set of alternative choices with certain outcomes. They are endowed with preferences satisfying the basic choice axioms-that is, they have a transitive ranking of these alternatives. Rational choice simply means that they select their most preferred alternative in this ranking. If we know the decision maker's ranking, we can predict his or her choice infallibly. For instance, an individual's choice should not be affected by removing or adding an irrelevant (i.e., not top-ranked) alternative. Conversely, when we observe his or her actual choice, we know it was his or her top-ranked alternative.
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