The status quo bias, the name given for individuals’ propensity to prefer the status quo to an alternative option, has been attributed to loss aversion (Kahneman, Knetsch, & Thaler, 1991) and thus taken as evidence supportive of loss aversion. In particular, the loss aversion account suggests that the loss of the status quo option looms larger than the gain of an alternative (change) option. However, Ritov and Baron (1992) provided evidence that the status quo bias was not a propensity to remain at the status quo per se, but a propensity to favor inaction over action (i.e., omission over commission).
In particular, Ritov and Baron showed that when presented with a choice that involved the option to do nothing or to do something, people tended to choose to do nothing; this decision resulted in a tendency toward the choice of the status quo option when doing nothing maintained the status quo, but a tendency toward the choice of the change option when doing nothing resulted in a change from the status quo. Others have found that a propensity toward the status quo sometimes persists even when action is required to maintain the status quo (Schweitzer, 1994), though Ritov and Baron (1992) did not find this to be the case.
Regardless, acceptance of the idea that individuals tend to favor inaction over action (rather than to favor the status quo over change per se) does not preclude the loss aversion explanation for the status quo bias. Instead, this observation merely qualifies the loss aversion explanation: if loss aversion explains the status quo bias, then the reference point must be inaction (i.e., the default situation of doing nothing) rather than the status quo. In other words, it is not the loss of the status quo that looms larger than the gain of the alternative; rather what is to be lost by action looms larger than what is to be gained by action.
At the same time, a propensity toward inaction does not, by any means, require loss aversion. Gal (2006)’s inertia account states that when people are indifferent between options, they should favor inaction over action because doing something requires a psychological motive. Alternatively, a preference for inaction might occur because individuals will tend to favor options that reduce processing and transaction costs. Other explanations for a propensity toward inaction are that errors of commission tend to involve greater regret than errors of omission (Ritov & Baron, 1995) and that individuals might rely on an “if ain’t broke, don’t fix it” heuristic (alluded to by Baron & Ritov, 1994).
To illustrate that loss aversion is not required to explain the status quo bias, Gal (2006) asked participants if they would trade one good (a quarter minted in Denver) for an essentially identical good (a quarter minted in Philadelphia). Kahneman (2011) has noted that loss aversion does not come into play when individuals exchange essentially identical goods (e.g., when trading one $5 bill for five $1 bills) because people do not code such exchanges in terms of losses and gains. Nonetheless, Gal (2006) found that more than 85% chose to retain their original quarter. We recently replicated this result by asking 149 MTurk participants whether they would prefer to trade a $20 bill they were slated to receive for another $20 bill (i.e., the change option) or to stick with the original $20 bill they were slated to receive (the status quo option). In one version, participants were only able to choose between these two options, whereas in another version, participants were able to indicate that they were indifferent between the options. Although, according to Kahneman (2011), loss aversion should not come into play in this context because the exchange would not be coded in terms of losses and gains, we observed a clear tendency of participants to indicate a preference for the status quo option (see Figure 1). Thus, again, the presence of a status quo bias should not be viewed as evidence of loss aversion.
In sum, the mere presence of a status quo bias (or inaction bias) does not provide insight into whether losses loom larger than gains. The status quo bias might be caused by the loss of the status quo looming larger than the gain of an alternative, but it might equally be caused by any of a number of other factors that lead toward a propensity toward inaction (and/or a propensity toward the status quo). As such, the presence of a status quo bias, in and of itself, cannot be taken as tantamount to evidence for loss aversion.
Status quo bias and loss aversion