Taste uncertainty and status quo effects in consumer choice

We use reference-dependent expected utility theory to develop a model of status quo effects in consumer choice. We hypothesise that, when making their decisions, individuals are uncertain about the utility that will be yielded by their consumption experiences in different ‘taste states’ of the world. If individuals have asymmetric attitudes to gains and losses of utility, the model entails acyclic reference-dependent preferences over consumption bundles. The model explains why status quo effects may vary substantially from one decision context to another and why some such effects may decay as individuals gain market experience.