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Projection Bias in Catalog Orders

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Abstract:

Evidence suggests that people understand qualitatively how tastes change over time, but underestimate the magnitudes. This evidence is limited, however, to laboratory evidence or surveys of reported happiness. We test for such projection bias in field data. Using data on catalog orders of cold-weather items, we find evidence of projection bias over the weather—specifically, people's decisions are overinfluenced by the current weather. Our estimates suggest that if the order-date temperature declines by 30°F, the return probability increases by 3.95 percent. We also estimate a structural model to measure the magnitude of the bias.

Document Type: Research Article

DOI: http://dx.doi.org/10.1257/000282807783286810

Publication date: September 1, 2007

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aea/aer/2007/00000097/00000004/art00007
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