The focal Luce model with status Quo

Abstract

We consider stochastic choice problems. The “attraction effect” is a commonly observed and attested behavioral bias in experimental and empirical studies. For stochastic choice problems, we propose a model incorporating this effect in addition to status quo bias and compromise effect, which we call the “Focal Luce Model with Status Quo” (FLM-SQ). In the FLM-SQ, the decision-maker is only drawn to alternatives that are better than the status quo alternative, and focal alternatives are relatively more likely to be chosen. We characterize the FLM-SQ in terms of four properties.