Strategic Inertia and Institutional Change:A Behavioral Model of Price Reforms versus Action Deletion (opens in new tab)

Why do inefficient practices, technologies, or institutions persist even when su perior alternatives are available? This paper introduces a quantal response equilib rium with status-quo bias (QRE-SB) in which each player incurs a fixed switching cost when deviating from an inherited default action. In a binary coordination game, we compare two policy interventions: a tax on the default action (price-only reform) versus deleting the default actio...