Status Quo Bias Definition, Examples, Impact

Status quo bias refers to the phenomenon of preferring that ones environment and situation remain as they already are. The phenomenon is most impactful in the realm of decision-making: when we make decisions, we tend to prefer the more familiar choice over the less familiar, but potentially more beneficial, options. Key Takeaways: Status Quo Bias Status quo bias refers to the phenomenon of preferring that ones environment and/or situation remains as it already is.The term was first introduced in 1988 by Samuelson and Zeckhauser, who demonstrated status quo bias through a series of decision-making experiments.Status quo bias has been explained through a number of psychological principles, including loss aversion, sunk costs, cognitive dissonance, and mere exposure. These principles are considered irrational reasons for preferring the status quo.Status quo bias is considered rational when the transition cost is greater than the potential gains of making a change. Status quo bias affects all kinds of decisions, from relatively trivial choices (e.g. which soda to purchase) to very significant choices (e.g. which health insurance plan to select). Early Research The term status quo bias was first used by researchers William Samuelson and Richard Zeckhauser in a  1988 article called Status quo bias in decision-making. In the article, Samuelson and Zeckhauser described several decision-making experiments that demonstrated the existence of the bias. In one of the experiments, participants were given a hypothetical scenario:  inheriting a large sum of money. They were then  instructed to decide how to invest the money by making a selection from a series of fixed options. However, some participants were given a neutral version of the scenario, while others were given a status quo bias version. In the neutral version, the participants were only told that they inherited money and that they needed to choose from a series of investment options. In this version, all the choices were equally valid; the preference for things to remain as they are was not a factor because there was no prior experience to draw upon. In the status quo version, the participants were told they inherited money and the money was already invested in a specific way. They were then presented with a set of investment options. One of the options retained the portfolio’s current investment strategy (and thus occupied the status quo position). All of the other options on the list represented alternatives to the status quo. Samuelson and Zeckhauser found that, when presented with the status quo version of the scenario, participants tended to choose the status quo over the other options. That strong preference held across a number of different hypothetical scenarios. In addition, the more choices presented to participants, the greater their preference for the status quo. Explanations for Status Quo Bias The psychology behind status quo bias has been explained through several different principles, including cognitive misperceptions and psychological commitments. The following explanations are some of the most common. Importantly, all of these explanations are considered irrational reasons for preferring the status quo. Loss Aversion Studies have shown that when individuals make decisions, they  weigh the potential for loss more heavily than the potential for gain. Thus, when looking at a set of choices, they focus more on what they could lose by abandoning the status quo than on what they could gain by trying something new. Sunk Costs The sunk cost fallacy refers to the fact that an individual will often continue to invest resources (time, money, or effort) into a specific endeavor simply because they have already invested resources in that endeavor, even if that endeavor has not proven beneficial. Sunk costs lead individuals to continue along a specific course of action, even if it is failing.  Sunk costs contribute to status quo bias  because the more that an individual invests in the status quo, the more likely he or she is to continue to invest in the status quo. Cognitive Dissonance When individuals are faced with inconsistent thoughts, they experience cognitive dissonance; an uncomfortable feeling that most people wish to minimize. Sometimes, individuals will avoid thoughts that make them uncomfortable in order to maintain cognitive consistency. In decision-making, individuals tend to see an option as more valuable once they have chosen it. Even simply considering an alternative to the status quo can cause cognitive dissonance, as it puts the value of two potential options in conflict with one another. As a result, individuals may stick with the status quo in order to reduce that dissonance. Mere Exposure Effect The  mere exposure effect  states that people tend to prefer something they’ve been exposed to before. By definition, we are exposed to the status quo more than we are exposed to anything that is not the status quo. According to the mere exposure effect, that exposure itself creates a preference for the status quo. Rationality vs. Irrationality Status quo bias is sometimes the component of a rational choice. For example, an individual may choose to retain their current situation because of the potential transition cost of switching to an alternative. When the cost of the transition is greater than the gains brought about by switching to the alternative, it is rational to stick with the status quo. Status quo bias becomes irrational  when an individual ignores choices that can improve their situation simply because they want to maintain the status quo. Examples of Status Quo Bias in Action Status quo bias is a pervasive part of human behavior. In their 1988 article, Samuelson and Zeckhauser  provided a number of real-world examples of status quo bias that reflect the wide-ranging impact of the bias. A strip-mining project forced the citizens of a town in West Germany to be relocated to a similar area nearby. They were offered several options for the plan of their new town. The citizens chose the option most similar to their old town, even though the layout was inefficient and confusing.When offered several sandwich options for lunch, individuals often choose a sandwich they have eaten before. This phenomenon is called regret avoidance: in seeking to avoid a potential regrettable experience (choosing a new sandwich and disliking it), individuals opt to stick with the status quo (the sandwich with which they are already familiar).In 1985, Coca Cola unveiled New Coke, a reformulation of the original Coke flavor. Blind taste tests found that many consumers preferred New Coke to Coke Classic. However, when consumers were given the opportunity to choose which Coke to buy, they chose Coke Classic. New Coke was ultimately discontinued in 1992.In political elections, the incumbent candid ate is more likely to win than the challenger. The more candidates are in the race, the greater the incumbents advantage.When a company added new insurance plans to the list of insurance options, existing employees chose the old plans much more frequently than new employees did. New employees tended to select new plans.Participants in a retirement plan were given the option of changing the distribution of their investments every year at no cost. Yet, despite varying rates of return among different options, only 2.5% of participants changed their distribution in any given year. When asked why they never changed their plan distribution, participants often couldn’t justify their preference for the status quo. Sources Bornstein, Robert F. â€Å"Exporsure and Affect: Overview and Meta-Analysis of Research, 1968-1987.† Psychological Bulletin, vol. 106, no. 2, 1989, pp. 265-289.  http://dx.doi.org/10.1037/0033-2909.106.2.265Henderson, Rob. â€Å"How Powerful is Status Quo Bias?† Psychology Today, 2016.  https://www.psychologytoday.com/us/blog/after-service/201609/how-powerful-is-status-quo-biasKahneman, Daniel, and Amos Tversky. â€Å"Choices, Values, and Frames.† American Psychologist, vol. 39, no. 4, 1984, pp. 341-350.  http://dx.doi.org/10.1037/0003-066X.39.4.341Pettinger, Tejvan. â€Å"Status Quo Bias.†Ã‚  EconomicsHelp, 2017.  https://www.economicshelp.org/blog/glossary/status-quo-bias/Samuelson, William, and Richard Zeckhauser. â€Å"Status Quo Bias in Decision Making.†Ã‚  Journal of Risk and Uncertainty, vol. 1, no. 1, 1988, pp. 7-59.  https://doi.org/10.1007/BF00055564