Motivation and emotion/Book/2019/Status quo bias

Status quo bias:
What is the SQB and how does it influence our decision-making?

Multimedia presentation (3 min)

Overview

Case study In 1985 the company Coca-Cola replaced their current formula with a new one, creating New Coke (Nebel, 2015). This new sweeter formula performed better in blind taste test, however, consumers reacted negatively to the New Coke (Nebel, 2015). This was not because of the taste but because the old formula was taken away (Nebel, 2015). This is an older example of status quo bias. Consumers wanted to keep the old formula and not change the default or norm of Coca-Cola. This caused the New Cola to do poorly, and the creation of Coca-Cola Classic to be successful (Nebel, 2015). This example also shows that sticking with the status quo is not always best, as the New Cola tasted better to consumers (Nebel, 2015).

The status quo bias (SQB) is a tendency for people to choose the default option when faced with making a decision (Nebel, 2015). Another way to think of it is of doing nothing or trying to maintain the current situation (Samuelson & Zeckhauser, 1988). A great example of the second aspect is the New Coke case study (Nebel, 2015). In this study people’s decision was influenced by the SQB enough that Coca-Cola had to bring back a lesser product to appease the community (Nebel, 2015).

There are a few theories that try to explain the influence of SQB on decision making. These are that SQB is a combination of rational decision making accompanied by transition cost or uncertainty, cognitive uncertainty, psychological commitment (Samuelson & Zeckhauser, 1988), the endowment effect (Masatlioglu & Ok, 2005), and loss-aversion (Ritov & Baron, 1992). Our decision making is influenced by SQB in less theoretical ways as well. It influences people through choice overload and attention capturing leading people to choose the default option (Dean, Kibris, & Masatlioglu, 2014). Overall, around 40-50% of the time do decisions fall prey to the effects of the SQB (Kahneman, Knetsch & Thaler, 1991, 1991; Mohamed, Hauber, Johnson, Meddis & Wagner, 2008). There are some ways to overcome the SQB. These are, the changed brain activation (Fleming, Thomas & Dolan, 2010), the reversal test or the double reversal test  (Bostrom & Ord, 2006), and even being aware (Eidelman & Crandall, 2012).

Focus questions: How does bias in decision making happen? What is the status quo bias and what are some theories explaining it? How the status quo bias influences and motivates decision making? When does the status quo bias affect us? How can we overcome the status quo bias?

Basics of decision making

To understand SQB it is important to understand why and how it happens by looking into the basics of decision making. Decision making has the theory of rational choice theory, which explains that people are rational and make their decisions by selecting their most preferred option (Samuelson & Zeckhauser, 1988). Through this theory it would be possible to predict a person’s decision once you know their preference (Samuelson & Zeckhauser, 1988). However, if the outcome is unknown then the options are assessed and the decision is made by judging the highest expected utility (Samuelson & Zeckhauser, 1988). This decision-making process is reliant on basic assumptions or heuristics, which help to streamline the process to make complex decisions easier and faster (Das & Teng, 1999). Theoretically then people should be making the best decision in every circumstance. It should also be possible for an outsider to weigh up each option and correctly guess which option the person would make. However, this is not the case because although these heuristics and assumptions are useful, they are not always helpful when making decisions. They also introduce biases that can lead to errors when making the decision (Das & Teng, 1999). This is how we encounter problems when making decisions or pick the less optimal decision (one that does not fully benefit the person). These biases result from three main heuristics: representativeness, availability, adjustment, and anchoring (Das & Teng, 1999). This is where the SQB comes in, it is a bias adopted when making decisions.

Quiz

1 ______ help to streamline the process of decision making

	Thinking hard.
	Heuristics and assumptions.
	The status quo bias.

2 Heuristics have a downside, which is that:

	They introduce assumptions.
	They make the decision making process quicker.
	They also introduce biases that can lead to errors in decision making.

Status quo bias

SQB is a tendency to prefer something because it is the norm or default (Nebel, 2015). It can also be thought of as doing nothing, or maintaining the current position (Samuelson & Zeckhauser, 1988). A main outcome of the SQB is that people are reluctant to take action to change the state of the norm that leads to inaction (Ritov & Baron, 1992). This causes many issues since people tend to be more affected by the SQB when faced with a difficult decision causing them to stick with the current norm (Fleming, et al., 2010). However, the default option tends to be the worst choice out of them all (Fleming, et al., 2010). For example, when a person is presented with a situation that through action or inaction would result in an equally bad outcome the person chooses the inaction path (Ritov & Baron, 1992). This continued effect of the SQB even happens when the outcomes that are presented have both good and bad outcomes (Ritov & Baron, 1992). A few theories try to explain why the SQB motivates people to make the decision to stay with the current norm or choice.

Theories

There are some theories that explain the bases of SQB as well as explaining how it influences decision making.

Combination of rational decision making

One theory is that the SQB effect is a combination of rational decision making accompanied by transition cost or uncertainty, so it is affected by what the cost to change would be or affected by the fact that the cost is unknown (Samuelson & Zeckhauser, 1988) which can be considered scary. Another aspect is cognitive uncertainty, whether or not the person is sure of the information that is available (Samuelson & Zeckhauser, 1988). Finally, there is psychological commitment (Samuelson & Zeckhauser, 1988). These psychological commitments are ideas such as sunken costs, regret avoidance, and striving for consistency (Samuelson & Zeckhauser, 1988). The combination of the three aspects affect the motives to stay with the status quo when making a decision.

Endowment effect

Another theory that interacts with SQB is the endowment effect (Masatlioglu & Ok, 2005). This is when an option has more value to the decision maker because it is already owned (Masatlioglu & Ok, 2005). An experiment on university students was conducted that sorted participants into three groups, buyers, sellers, and choosers (Masatlioglu & Ok, 2005). The sellers were the ones who owned and had to sell the mugs (Masatlioglu & Ok, 2005). The sellers placed more value onto the mugs because they owned them which translated into the average cost being $7.12 (Masatlioglu & Ok, 2005). While the buyer and chooser groups saw the value of the mugs to be a lot less at an average cost of $2.87 and $3.12 (Masatlioglu & Ok, 2005). Linking this back to the SQB, it is possible to see that since the current option is already owned (or in effect), it has more value than any other choice giving a strength to the decision to remain with the status quo or be affected by the SQB. In other words, there is a motivation to keep what you have and not lose it.

Loss-aversion

This motivation to not lose what you have extends into the next theory that links the SQB with loss-aversion (Ritov & Baron, 1992). Since people are loss averse, they weigh decisions up in expected gain or losses but the losses are weighed more heavily (Ritov & Baron, 1992). It’s obvious that someone will not pick a decision if it has minimal gains and high losses but the SQB combined with this loss-aversion theory find that people are unlikely to make a change even if the expected gains are slightly higher than the expected loss (Ritov & Baron, 1992). The SQB can be seen as a type of loss-aversion as changing from the current option and perhaps people do not want to deal with the loss of that option.

Quiz

1 Preference for something because it is the norm or default choice is an example of:

	Decision making.
	The status quo bias.
	The endowment effect.
	Loss-aversion.

2 One theory states that status quo bias is a combination of:

	Rational decision making accompanied by transition cost or uncertainty, cognitive uncertainty, and psychological commitment.
	Rational decision making accompanied by cognitive uncertainty, and psychological commitment.
	Rational decision making accompanied by transition cost or uncertainty and cognitive uncertainty.
	Rational decision making accompanied by transition cost or uncertainty, and psychological commitment.

3 When an option has more value to the decision maker because it is already owned is the base of the ___________ effect:

	loss-aversion
	status quo
	human
	endowment

4 According to loss-aversion _______ is weighed more heavily than _______.

	gains, losses.
	gains, gains.
	losses, gains.
	losses, losses.

Decision making and SQB

Figure 1. An example of choice at supermarkets

The SQB has an interesting influence on decision making because it is a preference to default to the norm. Researchers have investigated this preference to follow the status quo has been observed in many areas, such as, financial investments, urban planning, power services, and law reforms (Nebel, 2015). The influences of SQB become stronger the more options there are (Kahneman, et al., 1991; Dean, et al., 2014). Which is thought to be caused by a kind of choice overload (Dean, et al., 2014). Therefore, even a seemingly smaller decisions, like what to buy, are influenced by the SQB (Fleming, et al., 2010). A study found that 72% of consumers only look at one package when they go to buy laundry detergent form the supermarket (Dean, et al., 2014). Figure 1 displays the vast amount of choice. The bias is strong due to the options, as there are always multiple brands of the same item. It is easier to default to the status quo and buy the same washing liquid, soap, or chocolate that is always brought.

The SQB has been thought to motivate and influence decision making through choice overload and attention capturing (Dean, et al., 2014). The same laundry detergent is always brought because there are too many options and it captures the attention since it is the default option (Dean, et al., 2014). Another aspect on why it motivates and influences our decision making is similar to the theory above that uses transition cost or uncertainty, cognitive uncertainty, and psychological commitment (Samuelson & Zeckhauser, 1988) and also the theory of loss-aversion (Ritov & Baron, 1992). That is, that people are motivated to rule out some alternative options and stay with the status quo due to potential losses or the possibility of regretting their choice (Dean, et al., 2014). This also links into the endowment effect, which is favouring what one already possesses making that option more valuable (Masatlioglu & Ok, 2005) or in other words not losing what one already possesses and regretting the change. Thinking back to the supermarket how many times have people tried a new product only to regret the decision and default back to their norm option. This could be due to a number of things, lacking in taste or quality, but it still reinforces sticking with the status quo.

The SQB does have a strong influence on our decision making. A study conducted by Suri, Sheppes, Schwarts, and Gross (2013) used electric shocks to test for the effect of SQB in patient inertia. The first experiment was on whether or not participants would choose to reduce the waiting time of the shock (Suri, Sheppes, Schwartz & Gross, 2013). There was a significant difference between the group that had free choice to shorten the shock or do nothing and the group that was forced to make a decision (Suri, et al., 2013). The first group was testing the SQB with the default option being not pressing the button to shorten the shocks (Suri, et al., 2013). Only 40.7% of time was the time shortened (Suri, et al., 2013). This experiment is interesting as it shows the strong effect and influence that the SQB has on decision making as many participants chose to wait for the shock. The SQB influenced decision making by having no choice be made.

The same study also looked into whether or not participants would choose to reduced the chances of receiving a shock (Suri, et al., 2013). In this experiment the status quo was not pressing the button (Suri, et al., 2013). The group that had the status quo presented to them pressed the button only 52.1% of the time (Suri, et al., 2013). This is a drastic reduction when compared to the group that was not presented with the status quo, as they pushed the button and reduced the chance of the shock 85.3% of the time (Suri, et al., 2013). This demonstrates that the SQB’s influence over decision making is strong enough that participants would choose to have an increased chance of a shock over reducing it (Suri, et al., 2013).

Although the percentage of people who went against the SQB in this experiment could be considered relatively high at around 40-50% it is still a significant finding and consistent with other findings (Suri, et al., 2013). Which found around the same percentage of people going against the SQB (Kahneman, et al., 1991; Mohamed, et al., 2008). Meaning that there was still 50-60% of participants that had their decision making influenced directly by the SQB (Kahneman, et al., 1991; Mohamed, et al., 2008). This high percentage of people choosing the status quo by default is a concerning outcome for people’s decision making and lives.

How is it a problem?

The SQB is a problem because many times staying with the status quo tends to have the worst outcome (Fleming, et al., 2010). A study that demonstrates this on electrical power choices (Kahneman, et al., 1991). It found that when users when given the option of different plans with varying reliability and rates they tended to prefer the status quo (Kahneman, et al., 1991). Of the high reliability group 60.2 percent chose the preference for their current group (Kahneman, et al., 1991). This is not a problem for this group as they had very good power service. However, of the low reliability group 58.3 percent chose their first preference to be for their current power system, only 5.8 percent chose the more reliable option that would increase rates by 30 percent (Kahneman, et al., 1991). This experiment demonstrates the problem of staying within the status quo is often the worse option. This is especially a problem for the low reliability group as they are missing out on better service. Maybe this is not a huge problem in this circumstance as it is a fairly old example and also had a cost increase to the decision but what if the decision is to choose better health plans or retirement funds. The impact of blindly going with the status quo can sometimes have huge quality of life repercussions and that is why it is such a huge problem for decision making.  

Quiz

1 The status quo bias can affect:

	All decisions even small ones.
	Only small decisions.
	Only large decisions.
	Only large and intimidating decisions.

2 The status quo bias percentage of effect on influencing decisions is around:

	20-30%
	30-40%
	40-50%
	50-60%

3 The choice made under the effect of the status quo bias tends to be:

	The best option.
	The most fun option.
	The worst option.
	Neither a good option or bad.

Case studies

Just like the example of Coca-Cola introducing New Cola and it being rejected (Nebel, 2015), there are many other real-world examples of the SQB affecting people’s judgement.

Health

In health the SQB can affect what medications people use (Mohamed, et al., 2008). A survey conducted on 509 asthma patients asked whether or not they would be willing to change their medication to another medication or stay on their current one (Mohamed et al., 2008). 56% choose to keep using their current medication (Mohamed et al., 2008). When participants were given three choices, two different medications, and the their current, 55% choose to keep using their current medication (Mohamed et al., 2008). Unlike the Coca-Cola example this one has a more negative implication. Since picking the option that conforms to the SQB is often the worst outcome (Fleming, et al., 2010) it is possible that many people are missing out on medications that could be more cost effective, works faster, and more effectively. This can even be extended beyond medications. For example, how many people are picking to stay with their current treatment, remedies or even doctors when they are not the best course of action simply because it is the norm.

Politics

The SQB can also be seen in politics when implementing reforms if the losses and benefits are unknown (Fernandez & Rodrik, 1991). A good example of this is in trade liberalisation (Fernandez & Rodrik, 1991). There is a consensus amongst economists that there are huge benefits to trade liberalisation (Fernandez & Rodrik, 1991). However, amongst politicians it is one of the most contested issues, only being accepted during cases of political regime change or in times of economic crisis (Fernandez & Rodrik, 1991). There are some instances where countries were able to go against the SQB to implement trade liberalisation and gain the benefits (Fernandez & Rodrik, 1991). In the 1960s was Taiwan and south Korea, in the 1970s was Chile, and in the 1980s was Turkey (Fernandez & Rodrik, 1991). In these counties the reform was generally implement against the wishes of business, who afterwards become the reforms biggest defender (Fernandez & Rodrik, 1991). This case is a great example of how uncertainty (Samuelson & Zeckhauser, 1988) and a difficult decision (Fleming, et al., 2010) can cause the SQB to take effect. Although these cases are fairly old, they are still relevant to current politics. Consider policies or reforms that were put off being implemented so the current status quo could be maintained. Perhaps debates about what to implement into law would change if people were more aware of how the SQB is preventing them from seeing the best options.

Finances

A study examined the U.S equity mutual fund market and how money invested into a fund depended upon previous investments into that same fund (Kempf & Ruenzi, 2005). This study examined the growth of funds from 1993 to 2001 containing 20,193 yearly fund observations from 383 different fund families (Kempf & Ruenzi, 2005). The results found that the SQB caused more people to choose a fund they have chosen previously (Kempf & Ruenzi, 2005). This happened again even in cases where staying with the same option was worse off than changing (Kempf & Ruenzi, 2005). Once again, the SQB has led to choosing the worst option (Fleming, et al., 2010). This study also found that the number of choices available increased the SQB effect (Kempf & Ruenzi, 2005). This strengthens previous research that has found the same effect (Kahneman, et al., 1991).

Overcoming SQB

One aspect of overcoming the SQB is that the brain structure changes when people choose to go against this bias (Fleming, et al., 2010). When rejecting the default decision an increase in activity appears in the subthalamic nucleus, as well as, the inferior frontal cortex influence on the subthalamic nucleus (Fleming, et al., 2010). This was found out by getting participants to make a decision while undergoing an fMRI which showed that blood oxygen level-dependent signals increased in these areas of the brain when the participants went against the SQB during a difficult, but not easy decision (Fleming, et al., 2010). Although this research suggests what area of the brain is used when overcoming the SQB it does little to change how people can implement real world aspects to overcome this bias. As no one is able to have an fMRI every time they make decisions.

A more practical way to reduce the influence the SQB has on decision making is to use a process or test to see if the person's decision is being clouded. The reversal test and double reversal test can be used (Bostrom & Ord, 2006). The test however, is only thought to be useful during irrational SQB (Clark, 2016). Which reduces the practical application of this test. The reversal test is used when the proposed change is thought to have a negative outcome then the person should think from the opposite direction to the original (Bostrom & Ord, 2006). If this new option thought from the opposite direction also has a negative outcome then it becomes the person's responsibility to explain why both situations are negative (Bostrom & Ord, 2006). If they cannot then they may be under the influence of the SQB (Bostrom & Ord, 2006). The double reversal test requires the thought that increasing or decreasing a parameter would both have a negative effect (Bostrom & Ord, 2006). Therefore, one would need to think both of adding something to the situation or taking it away. For example, consider a natural factor is about to affect the neighbourhood, is it acceptable to stop it from happening? When the natural factor leaves would it be acceptable to replace it with a man-made influence (Bostrom & Ord, 2006)? This thought process is good at reducing the influence of the SQB because it requires the person to consider multiple facets of their decision. However, these perspectives require a lot of effort and looks at it from a group perspective. It would be hard to use these internally as one may not be aware their decision is being influenced by the SQB (Eidelman & Crandall, 2012).

For an individual the best way to reduce the SQB influence on decision making is to try to frame their thinking away from potential losses and instead towards potential gains (Eidelman & Crandall, 2012). As well as taking notice that their decisions are influenced by biases (Eidelman & Crandall, 2012). However, this can be very hard as it requires the person to know their decision is being influenced by the SQB and to also put in energy or resources into changing this (Eidelman & Crandall, 2012). Though, this does not seem like much it is better than being unaware and making poor choices due to a basic bias.

Conclusion

SQB influences and motivates decision making through some unique ways that aren’t always noticeable (Eidelman & Crandall, 2012). Since a few different theories like the combination of rational decision making accompanied by transition cost or uncertainty, cognitive uncertainty, psychological commitment (Samuelson & Zeckhauser, 1988), the endowment effect (Masatlioglu & Ok, 2005), and loss-aversion (Ritov & Baron, 1992) try to explain the SQB it’s effect is still an uncertain aspect. However, there is a consensus that SQB occurs around 50-60% (Kahneman, et al., 1991; Mohamed, et al., 2008). Also, that SQB negatively influences decision making because often times the decision chosen or stuck with has the worst overall outcome out of all of them (Fleming, et al., 2010). There is also a consensus that the SQB influences decisions in a wide spectrum of areas, such as, soft drink preference (Nebel, 2015), what one buys from the supermarket (Dean, et al., 2014), when making health decisions (Mohamed et al., 2008), implementing reforms (Fernandez & Rodrik, 1991), and also what someone will invest in (Kempf & Ruenzi, 2005). However, not all is hopeless as the best ways to stop the SQB effect are using tests in groups like the reversal test and double reversal test (Bostrom & Ord, 2006; Clark, 2016). As well as individually making sure one is aware and knowledgeable about what common bias influence decision making (Eidelman & Crandall, 2012).

See also

• Status quo bias (Wikipedia)
• Decision-making (Wikipedia)
• Loss-aversion: Why is the motivation to avoid loss stronger than the motivation to seek gain and what are the consequences? (Book chapter 2018)

References

Bostrom, N., & Ord, T. (2006). The Reversal Test: Eliminating Status Quo Bias in Applied Ethics. Ethics, 116, 656-679. https://doi:10.1086/505233

Clarke, S. (2016). The reversal test, status quo bias, and opposition to human cognitive enhancement. Canadian Journal of Philosophy, 46, 369-386. https://doi.org/10.1080/00455091.2016.1176982

Das, T., & Teng, B. (1999). Cognitive biases and strategic decision processes: an integrative perspective. Journal Of Management Studies, 36, 757-778. https://doi:10.1111/1467-6486.00157

Dean, M., Kibris, O., & Masatlioglu, Y. (2014). Limited attention and status quo bias. SSRN Electronic Journal. https://doi:10.2139/ssrn.2519242

Eidelman, S., & Crandall, C. (2012). Bias in Favor of the Status Quo. Social And Personality Psychology Compass, 6, 270-281. https://doi:10.1111/j.1751-9004.2012.00427.x

Fernandez, R., & Rodrik, D. (1991). Resistance to reform: status quo bias in the presence of individual-specific uncertainty. American Economic Review, 81, 1146-1155.

Fleming, S., Thomas, C., & Dolan, R. (2010). Overcoming status quo bias in the human brain. Proceedings of the National Academy of Sciences, 107, 6005-6009. https://doi.org/10.1073/pnas.0910380107

Kahneman, D., Knetsch, J., & Thaler, R. (1991). Anomalies: the endowment effect, loss aversion, and status quo bias. Journal Of Economic Perspectives, 5, 193-206. https://doi:10.1257/jep.5.1.193

Kempf, A., & Ruenzi, S. (2005). Status quo bias and the number of alternatives: an empirical illustration from the mutual fund industry. SSRN Electronic Journal. https://doi:10.2139/ssrn.820905

Masatlioglu, Y., & Ok, E. (2005). Rational choice with status quo bias. Journal Of Economic Theory, 121, 1-29. https://doi:10.1016/j.jet.2004.03.007

Mohamed, A., Hauber, A., Johnson, F., Meddis, D., & Wagner, S. (2008). Status-quo bias in stated-choice studies: is it real?. Value In Health, 11, A567-A568. https://doi:10.1016/s1098-3015(10)66867-2

Nebel, J. (2015). Status quo bias, rationality, and conservatism about value. Ethics, 125, 449-476. https://doi.org/10.1086/678482

Ritov, I., & Baron, J. (1992). Status-quo and omission biases. Journal of Risk and Uncertainty, 5. https://doi:10.1007/bf00208786

Samuelson, W., & Zeckhauser, R. (1988). Status quo bias in decision making. Journal Of Risk And Uncertainty, 1, 7-59. https://doi:10.1007/bf00055564

Suri, G., Sheppes, G., Schwartz, C., & Gross, J. (2013). Patient inertia and the status quo bias: when an inferior option is preferred. Psychological Science, 24, 1763-1769. https://doi:10.1177/0956797613479976

External links

• An example of the status quo bias in effect (YouTube)
• A brief explanation of the status quo bias in economics (YouTube)
• How the Status Quo Bias Affects Your Decisions (Very well mind page)