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The Dynamics and Revealed Preference of Status-Quo Optimality

Vega-Redondo, Fernando (1995) 'The Dynamics and Revealed Preference of Status-Quo Optimality.' Economic Theory, 6 (2). pp. 263-82. ISSN 0938-2259

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Abstract

In a preceding companion paper, a static model of individual decision making was proposed that, due to imprecise perceptions, induces simple and inertial behavior at equilibrium ("status-quo optimal") points. This paper addresses two complementary issues. Firstly, it studies the learning dynamics induced by the model and shows that its well-defined limit behavior ranges from status-quo optimal to fully optimal, depending on the underlying features of the problem. Secondly, the paper characterizes the behavioral implications of the model and compares them with those derived from standard decision-theoretic frameworks. Specifically, it is shown that, from a Revealed-Preference perspective, status-quo optimal behavior may be identified with that rationalizable by an acyclic preference relation, possibly intransitive.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 06 Jan 2013 09:12
Last Modified: 06 Jan 2013 09:12
URI: http://repository.essex.ac.uk/id/eprint/4956

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