Status quo bias: what it is, how it affects us, and examples

Status quo bias affects how we perceive and take for granted the present state of affairs.

There are many mental shortcuts that we routinely fall into. Some we are more aware of than others.

This time we are going to focus on a relatively unknown one, but one that affects us with a high frequency. It is the status quo bias.. Below we will discover what it is and what are the most common effects when we use it.

What is the status quo bias?

The status quo bias is an innate preference of the human being not to see the situation in which he finds himself modified.. That is, it acts by generating an inclination towards the current state as opposed to other options in which he would experience changes of some kind that would therefore modify his situation in some direction. Therefore, it is a psychological effect whereby the person tends to decide to stay as they are rather than change.

The status quo bias is an emotional bias, i.e., a bias in which our emotions generate distortions when reasoning and making judgments about a particular aspect. In this case, it specifically affects those decisions that oppose an option in which the subject would stay as he is and another in which he would have to undergo some modification of that base state, making him tend to opt for the first of them.

The concept of the status quo bias was coined by the authors William Samuelson and Richard Zeckhauserin 1988. The expression uses the word bias, which is an error in thinking that pushes us in a certain direction without us being aware of it on many occasions. The other part of the name is the Latin expression statu quo, which means the current state of a certain element, in this case, of the person.

Status quo bias should not be confused with another phenomenon called psychological inertia.. Although both have similarities, they are not exactly the same. The difference lies in the activity or passivity of the subject to maintain his current situation. In the case of the status quo bias, the person will take an active part to prevent a certain event from generating changes.

But in the case of psychological inertia, he will be passive in the course of events. Therefore, he would not take part in changing his status quo, but neither would he act to prevent certain events from affecting the stable situation in which he finds himself.

Explanation of the status quo bias

We already know what the status quo bias consists of. Now we will try to understand the psychological phenomena behind this curious mechanism in our way of thinking and making decisions. According to some researchers, this phenomenon would be formed by the mixture of other psychological biases that affect us routinely..

Let's review several of these effects.

1. Loss aversion

One of them is loss aversion. It is an effect by which a subject will tend to prefer to avoid losing a certain amount or a certain good, rather than gaining the same amount or obtaining a product of equivalent value.. In other words, losses weigh more heavily on us than not earning exactly the same amount, even though in economic terms it is a comparable situation.

The difference lies in the fact that we prefer that our situation does not change for the worse rather than that the situation changes for the better. This effect is partly responsible for the status quo bias.

2. Endowment effect

Another curious phenomenon that also has to do with psychology and behavioral economics is the endowment effect. This is another bias whereby we tend to perceive a we tend to perceive a given good as more valuable as long as we own it.. Therefore, we will experience a tendency to consider that it is worth more money when we try to sell it than when we are willing to buy it, even though the good is exactly the same.

Suppose a person puts his car up for sale. He will mentally appraise it at a certain value. However, if that same person did not have a car and instead of selling it he were to buy one exactly the same as in the previous assumption, he would always be willing to pay a lower price than the one he had considered in the first case.

In this case, the status quo bias has to do with the endowment effect because the subject is only willing to change his current situation when he considers that the benefit is greater than the possible risk.

3. Regret avoidance

Another interesting psychological concept that would be helping to generate the status quo bias would simply be regret avoidance. That is, the person will exhibit a tendency to prefer not to have to regret the consequences of a decision. Therefore, he will prefer to stay as he is, although paradoxically he may also regret not having made the decision and therefore have lost possible benefits.

But, as we saw in the previous effects, not taking risks will prevail over the possibility of obtaining equivalent benefits.

4. Mere exposure effect

Another phenomenon underlying the status quo bias is the mere exposure effect. This is another mental shortcut whereby a person will tend to show a preference for those stimuli that he or she knows, simply because he or she knows them. That is, the fact of having been exposed to a certain element will make the person feel comfortable with it and prefer it to other equivalent stimuli..

This mechanism is also called the familiarity principle.

Examples of status quo bias

After a first introduction in which we have been able to get a general idea of what the status quo bias implies, and a second part in which we have tried to learn more about the psychological mechanisms involved in its functioning, we will now try to visualize it through a series of examples.

1. Investments

We can visualize the status quo bias when we are faced with situations in which a person has the option of investing a sum of money among different possibilities, with lower or higher risk. Depending on the person's starting situation (if he/she has already invested in the past and in what type of fund), he/she will be more likely to take risks or on the contrary will prefer to stay as he/she is and give up possible benefits.

Insurance

One of the classic examples of the status quo bias was accidentally carried out by an automobile insurance company in the US.. In the 1990s, this organization contacted its customers to give them a choice between two different insurance options. In option A, they had to pay a higher amount, but in return they would have a full right to make claims. Option B was cheaper, but significantly limited the options for possible claims.

This campaign was conducted in two different states, New Jersey and Pennsylvania. In New Jersey, the majority chose option B, while in Pennsylvania, the bulk of customers chose option A. How is it possible that there was such an obvious difference between the two groups? Precisely because in New Jersey, option B was the default option for customers, while in Pennsylvania, option A was the standard option.

What was demonstrated is that in reality the people who participated in this study did not make a calculated and rational decision, but were driven by the status quo bias, i.e., they preferred to stay as they were rather than explore other possibilities, even if there were potential benefits in return.

3. Hiring

The status quo bias has also has also been observed in the organizational world and specifically in the Human Resources department.. One study showed that over the course of a selection process, the predominant characteristics of the candidates who made it to the final stage would determine who would be chosen, or rather, who would not be chosen.

In this case, the study discussed the possibility that all but one candidate would share characteristics such as gender or race. In that case, the remaining candidate would have virtually every option to be automatically rejected, and it would be because of the status quo bias.

However, this study also found that if instead of one candidate, there are two candidates who share these minority traits, their chances grow almost 80 times higher than the previous assumption.. A truly striking effect that, if not known to recruiters, can significantly bias their judgment in selecting candidates.

Bibliographic references:

• Kahneman, D., Knetsch, J.L., Thaler, R.H. (1991). Anomalies: The endowment effect, loss aversion, and status quo bias. Journal of Economic Perspectives.
• Johnson, S.K., Hekman, D.R., Chan, E.T. (2016). If There’s Only One Woman in Your Candidate Pool, There’s Statistically No Chance She’ll Be Hired. Harvard Business Review.
• Samuelson, W., Zeckhauser, R. (1988). Status quo bias in decision making. Journal of risk and uncertainty. Springer.