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Projection Bias in Catalog Orders

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  • Michael Conlin
  • Ted O'Donoghue
  • Timothy J. Vogelsang

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. (JEL D12, L81)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 4 (September)
Pages: 1217-1249

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:4:p:1217-1249

Note: DOI: 10.1257/aer.97.4.1217
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Cited by:
  1. Stefano DellaVigna, 2007. "Psychology and Economics: Evidence from the Field," NBER Working Papers 13420, National Bureau of Economic Research, Inc.
  2. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The credibility revolution in empirical economics: how better research design is taking the con out of econometrics," LSE Research Online Documents on Economics 48898, London School of Economics and Political Science, LSE Library.
  3. Arik Levinson, 2009. "Valuing Public Goods Using Happiness Data: The Case of Air Quality," NBER Working Papers 15156, National Bureau of Economic Research, Inc.
  4. Arik Levinson, 2013. "Happiness as a Public Policy Tool," Working Papers gueconwpa~13-13-04, Georgetown University, Department of Economics.
  5. De Silva, Dakshina G. & Pownall, Rachel A.J. & Wolk, Leonard, 2012. "Does the sun ‘shine’ on art prices?," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 167-178.
  6. Justine Hastings & Jesse M. Shapiro, 2012. "Mental Accounting and Consumer Choice: Evidence from Commodity Price Shocks," NBER Working Papers 18248, National Bureau of Economic Research, Inc.
  7. Stefano DellaVigna & John A. List & Ulrike Malmendier, 2009. "Testing for Altruism and Social Pressure in Charitable Giving," NBER Working Papers 15629, National Bureau of Economic Research, Inc.
  8. Michael D. Grubb, 2006. "Selling to Overconfident Consumers," Discussion Papers 06-018, Stanford Institute for Economic Policy Research.
  9. Arik Levinson, 2013. "Happiness, Behavioral Economics, and Public Policy," NBER Working Papers 19329, National Bureau of Economic Research, Inc.
  10. Daniel Kahneman & Richard H. Thaler, 2006. "Anomalies: Utility Maximization and Experienced Utility," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 221-234, Winter.
  11. Dan Acland & Matthew Levy, 2013. "Naivete, projection bias, and habit formation in gym attendance," LSE Research Online Documents on Economics 46827, London School of Economics and Political Science, LSE Library.
  12. Avi Goldfarb & Teck-Hua Ho & Wilfred Amaldoss & Alexander Brown & Yan Chen & Tony Cui & Alberto Galasso & Tanjim Hossain & Ming Hsu & Noah Lim & Mo Xiao & Botao Yang, 2012. "Behavioral models of managerial decision-making," Marketing Letters, Springer, vol. 23(2), pages 405-421, June.

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