Self-Control Preferences and Status-Quo Bias

Abstract

Abstract In a setting of choice with an observable status quo, we model an agent who struggles with temptation by exercising (costly) self-control, and who views the status quo as a commitment opportunity that allows him to avoid the self-control costs incurred when making an active choice. Our model is rational in that the agent always maximizes the same ex-post utility function; hence, when the standard indirect utility property holds, the model reduces to classic rational choice model. However, when we allow for costly self-control, our theory provides a rationale for three well-documented phenomena that cannot be captured by the standard model: the status-quo bias, the compromise effect, and the satisficing choice procedure (when ignoring the information on the status quo). A notable feature of our theory is that while it relaxes the indirect utility property, it still allows for a complete identification of an agent’s preference relation over menus. This is found to be important in many practical situations.