Inertia and context-dependent choice effects are well-studied classes of behavioural phenomena. While much is known about these effects individually , little is known about whether one of them "dominates" another . Knowledge of any such dominance is important for effective choice architecture and for accurate descriptive modelling. We initiate this empirical investigation with a lab experiment on choice under risk that was designed to test for dominance between *status quo bias* and the *decoy effect*. We find that the former unambiguously prevails over the latter and is powerful enough to make the average subject switch from being risk averse to being risk-seeking.  The observed reversal in risk attitudes is explainable by a large class of Kozsegi-Rabin (2006) reference-dependent preferences.
Inertia and context-dependent choice effects are well-studied classes of behavioural phenomena. While much is known about these effects in isolation , little is known about whether one of them "dominates" the other when both can potentially be present . Knowledge of any such dominance is relevant for effective choice architecture and descriptive modelling. We initiate this empirical investigation with a between-subjects lab experiment that featured a single decision over two or three money lotteries. Our experiment was designed to test for dominance between *status quo bias* and the *decoy effect*. We find strong evidence for status quo bias and no evidence for the decoy effect. We also find that status quo bias is powerful enough so that, at the aggregate level, a fraction of subjects switch from being risk-averse to being risk-seeking. Survey evidence suggests that this is due to subjects focusing on the maximum possible amount when the risky lottery is the default and on the probability of winning more than the smallest amount when there is no default lottery. The observed reversal in risk attitudes is explainable by a large class of reference-dependent preferences.
R
individually
in isolation
R
another
the other when both can potentially be present
R
important
relevant
D
for accurate
R
lab experiment on choice under risk that
between-subjects lab experiment that featured a single decision over two or three money lotteries. Our experiment
R
that the former unambiguously prevails over the latter and
strong evidence for status quo bias and no evidence for the decoy effect. We also find that status quo bias
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to make the average subject
so that, at the aggregate level, a fraction of subjects
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risk averse
risk-averse
A
Survey evidence suggests that this is due to subjects focusing on the maximum possible amount when the risky lottery is the default and on the probability of winning more than the smallest amount when there is no default lottery.
D
Kozsegi-Rabin (2006)