Projection Bias in the Car and Housing Markets
AbstractProjection bias is the tendency to overpredict the degree to which one’s future tastes will resemble one’s current tastes. We test for evidence of projection bias in two of the largest and most important consumer markets – the car and housing markets. Using data for more than forty million vehicle transactions and four million housing purchases, we explore the impact of the weather on purchasing decisions. We find that the choice to purchase a convertible, a 4-wheel drive, or a vehicle that is black in color is highly dependent on the weather at the time of purchase in a way that is inconsistent with classical utility theory. Similarly, we find that the hedonic value that a swimming pool and that central air add to a house is higher when the house goes under contract in the summertime compared to the wintertime.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18212.
Date of creation: Jul 2012
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Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-14 (All new papers)
- NEP-FOR-2012-07-14 (Forecasting)
- NEP-TRE-2012-07-14 (Transport Economics)
- NEP-URE-2012-07-14 (Urban & Real Estate Economics)
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- Teresa, Briz & Drichoutis, Andreas & Nayga, Rodolfo & House, Lisa, 2011. "Examining Projection Bias in Experimental Auctions: The Role of Hunger and Immediate Gratification," MPRA Paper 44764, University Library of Munich, Germany, revised 05 Mar 0013.
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