Self-control preferences and status-quo bias (Q2690348)

This paper analyzes utility in a two-stage choice setting in which an agent first chooses between an observable status-quo option and a larger menu and then, if the status quo is rejected, chooses an alternative from the selected menu. It is examined the situation in which costly self-control reduces the value of a large menu below that of its best option. It is demonstrated how, if the larger menu provides less utility than its best options due to costly self-control, the agent may exhibit the status-quo bias (the tendency to choose the status-quo option in situations where a better option is available) and the compromise effect (inserting an extreme option leads to one of an initially rejected set of options being perceived as a compromise between the other options and being therefore chosen). Other costs, such as search costs, regret, and shame, are considered. Representability conditions are discussed. A new approach to rationalization of the choice functions is developed.