THE DYNAMICS AND REVEALED PREFERENCE OF STATUS-QUO OPTIMALITY

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 th e learning dynamics induced by the model and shows that its well-defin ed limit behavior ranges from status-quo optimal to fully optimal, dep ending on the underlying features of the problem. Secondly, the paper characterizes the behavioral implications of the model and compares th em with those derived from standard decision-theoretic frameworks. Spe cifically, it is shown that, from a Revealed-Preference perspective, s tatus-quo optimal behavior may be identified with that rationalizable by an acyclic preference relation, possibly intransitive.