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arxiv: 2605.21647 · v1 · pith:VIBGBEVOnew · submitted 2026-05-20 · 💰 econ.TH

Strategic Inertia and Institutional Change:A Behavioral Model of Price Reforms versus Action Deletion

Madjid Eshaghi Gordji , Mohammadali Berahman , Hasti Eshaghi This is my paper

Pith reviewed 2026-05-22 08:16 UTC · model grok-4.3

classification 💰 econ.TH
keywords coordination gamequantal response equilibriumstatus-quo biasinstitutional changeprice reformaction deletionstrategic inertiapolicy intervention
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The pith

Deleting the default action forces players to the superior equilibrium in coordination games with status-quo bias, unlike any finite tax.

A machine-rendered reading of the paper's core claim, the machinery that carries it, and where it could break.

The paper introduces a model where players in a binary coordination game incur a fixed cost to switch from an inherited default and choose according to a quantal response equilibrium that includes status-quo bias. It compares two interventions: taxing the default action versus removing it entirely. The analysis shows a tax threshold that triggers a shift, yet this threshold does not depend on how boundedly rational the players are. Removing the default action always moves play to the better equilibrium and, when that equilibrium benefits everyone, produces higher welfare than any tax that keeps the old action available.

Core claim

In a binary coordination game using quantal response equilibrium with status-quo bias, where each player pays a fixed switching cost to deviate from the inherited default, deleting the default action compels play at the superior equilibrium irrespective of switching costs or the degree of bounded rationality. When the superior equilibrium is Pareto dominant, this deletion produces strictly higher expected welfare than any finite tax that leaves the inferior action feasible.

What carries the argument

Quantal response equilibrium with status-quo bias (QRE-SB) in a binary coordination game, which adds a fixed switching cost for moving away from the inherited default action and thereby generates inertia.

Load-bearing premise

Players choose via a quantal response equilibrium that includes a fixed cost for deviating from an inherited default in a simple two-action coordination game.

What would settle it

A controlled experiment in which subjects play the coordination game and, after the default action is deleted, still coordinate on the inferior equilibrium would falsify the central claim.

Figures

Figures reproduced from arXiv: 2605.21647 by Hasti Eshaghi, Madjid Eshaghi Gordji, Mohammadali Berahman.

Figure 1
Figure 1. Figure 1: Equilibrium probability of the status quo [PITH_FULL_IMAGE:figures/full_fig_p013_1.png] view at source ↗
read the original abstract

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 action entirely (ban). We prove that there exists a threshold tax below which the status quo persists and above which a transition occurs; notably, this threshold does not depend on the degree of bounded ratio nality. Deleting the default action always forces play to the superior equilibrium, irrespective of switching costs or rationality. Moreover, when the superior equilib rium is Pareto-dominant, deletion yields strictly higher expected welfare than any finite tax that leaves the old action feasible. Numerical simulations illustrate the theoretical predictions. The framework provides a formal foundation for the policy principle that sometimes you must ban, not just tax, with direct applications to climate policy, social media regulation, and international sanctions.

Editorial analysis

A structured set of objections, weighed in public.

Desk editor's note, referee report, simulated authors' rebuttal, and a circularity audit. Tearing a paper down is the easy half of reading it; the pith above is the substance, this is the friction.

Referee Report

2 major / 2 minor

Summary. The paper develops a quantal response equilibrium with status-quo bias (QRE-SB) for a binary coordination game in which agents face a fixed switching cost when deviating from an inherited default action. It compares a tax on the default action to outright deletion of that action, claiming to prove that the critical tax threshold inducing a switch to the superior equilibrium is independent of the rationality parameter, that deletion always forces play onto the superior equilibrium regardless of switching costs or rationality, and that deletion yields strictly higher expected welfare than any finite tax whenever the superior equilibrium is Pareto dominant. Numerical simulations are presented to illustrate the results, with suggested applications to climate policy, social media regulation, and sanctions.

Significance. If the derivations hold, the framework supplies a behavioral microfoundation for why inefficient equilibria can persist under price incentives but not under feasibility constraints, offering a formal argument for preferring action deletion to taxation in coordination settings with inertia. This could inform institutional-design discussions in applied economic theory.

major comments (2)
  1. [Abstract / Main theorem] Abstract and the statement of the main theorem on the tax threshold: the claimed independence of the threshold from the rationality parameter is load-bearing for the paper's contrast between price reform and deletion; the explicit derivation (showing how the QRE probabilities and switching-cost term cancel the rationality dependence) must be supplied in full, as the current sketch leaves open whether the result is an artifact of the binary payoff structure or holds more generally.
  2. [Welfare analysis section] Welfare-dominance claim: the assertion that deletion strictly dominates any finite tax when the superior equilibrium is Pareto dominant rests on QRE placing positive probability on the taxed action; the paper should state the precise payoff ordering (e.g., the inequality between the two equilibria) that guarantees the strict expected-welfare gap and confirm it survives the status-quo bias term.
minor comments (2)
  1. [Simulation section] The numerical simulations would benefit from reporting the exact grid of switching-cost values and rationality parameters used, together with a brief robustness check when the coordination payoffs are perturbed.
  2. [Model section] Notation for the status-quo bias adjustment in the QRE utility should be defined once at the outset rather than reintroduced in each proposition.

Simulated Author's Rebuttal

2 responses · 0 unresolved

We thank the referee for their careful reading and constructive comments, which help clarify the key contributions of our paper. We address each major comment in turn below.

read point-by-point responses

  1. Referee: [Abstract / Main theorem] Abstract and the statement of the main theorem on the tax threshold: the claimed independence of the threshold from the rationality parameter is load-bearing for the paper's contrast between price reform and deletion; the explicit derivation (showing how the QRE probabilities and switching-cost term cancel the rationality dependence) must be supplied in full, as the current sketch leaves open whether the result is an artifact of the binary payoff structure or holds more generally.

    Authors: We agree that the full derivation should be presented explicitly. In the revised manuscript we will expand the proof of Theorem 1 in Section 3 to include the complete algebraic steps. Starting from the QRE-SB choice probabilities, the equilibrium indifference condition at the threshold tax equates the biased expected utility of the default action to that of the alternative. The rationality parameter lambda appears in both the logit terms and the normalization; taking the log-odds ratio causes the lambda factors to cancel exactly, leaving the threshold tau* dependent only on the payoff gap and the fixed switching cost. We will also add a remark noting that the cancellation relies on the fixed (additive) nature of the status-quo bias and the binary action space, and we will discuss in the appendix why the result does not immediately extend to games with more than two actions. revision: yes

  2. Referee: [Welfare analysis section] Welfare-dominance claim: the assertion that deletion strictly dominates any finite tax when the superior equilibrium is Pareto dominant rests on QRE placing positive probability on the taxed action; the paper should state the precise payoff ordering (e.g., the inequality between the two equilibria) that guarantees the strict expected-welfare gap and confirm it survives the status-quo bias term.

    Authors: We will revise the welfare section to state the precise condition explicitly. We assume the superior equilibrium (a,a) is Pareto dominant, i.e., u_i(a,a) > u_i(b,b) for both players i, with the additional coordination structure that the game is supermodular. Under any finite tax the QRE-SB places strictly positive probability on the default action because the status-quo bias term shifts but does not eliminate the support of the distribution; expected welfare is therefore a convex combination of the two equilibrium payoffs with positive weight on the inferior outcome. Deletion removes the default action entirely, assigning probability 1 to the superior equilibrium. The resulting welfare gap is strictly positive and is unaffected by the bias term because the bias only reweights probabilities when both actions remain feasible; once the inferior action is deleted the bias has no object on which to operate. We will insert the relevant inequality and the short proof of strict dominance in the revised text. revision: yes

Circularity Check

0 steps flagged

No significant circularity detected in derivation chain

full rationale

The paper constructs a QRE-SB model for a binary coordination game and derives the tax threshold independence, the forcing effect of action deletion, and the welfare dominance result directly from the equilibrium definition and payoff structure. These follow as logical consequences of removing an action from the choice set (yielding probability 1 on the remaining action) and the maintained positive probability mass under QRE for any finite tax, without any reduction to fitted inputs, self-definitional loops, or load-bearing self-citations. The framework is self-contained against its stated assumptions and external benchmarks.

Axiom & Free-Parameter Ledger

1 free parameters · 1 axioms · 0 invented entities

The central claim rests on the behavioral assumption of fixed switching costs and the QRE-SB framework as an extension of standard quantal response equilibrium.

free parameters (1)
  • switching cost
    Fixed cost incurred for deviating from the inherited default action; central to generating status-quo bias.
axioms (1)
  • domain assumption Players follow quantal response equilibrium modified by a fixed switching cost from the default action.
    This behavioral assumption underpins the entire equilibrium analysis and policy comparisons.

pith-pipeline@v0.9.0 · 5730 in / 1391 out tokens · 67758 ms · 2026-05-22T08:16:39.026337+00:00 · methodology

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Reference graph

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