Projection Bias in Predicting Future Utility
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- George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2003. "Projection Bias in Predicting Future Utility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1209-1248.
- George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2001. "Projection Bias in Predicting Future Utility," General Economics and Teaching 0012003, University Library of Munich, Germany.
- Loewenstein, George & O'Donoghue, Ted & Rabin, Matthew, 2002. "Projection Bias in Predicting Future Utility," Working Papers 02-11, Cornell University, Center for Analytic Economics.
- Loewenstein, George & O'Donoghue, Ted & Rabin, Matthew, 2000. "Projection Bias in Predicting Future Utility," Department of Economics, Working Paper Series qt5qh6142m, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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Keywords
addiction; consumption; cooling off; misprediction; projection bias; reference dependence people underappreciate how their own behavior and exogenous factors affect their future utility; and thus exaggerate the degree to which their future preferences resemble their current preferences. we present evidence which demonstrates the prevalence of such projection bias; and develop a formal model that draws out both descriptive and wlefare implications of the bias. the model helps interpret established behavioral anomalies such as the endowment effect; and helps to explain commonly observed suboptimal patterns of behavior such as addiction and excessive pursuit of a high material standard of living. the model also suggests potentially welfare-improving policies; such as mandatory " cooling-off periods" for certain types of consumer decisions. june 2000;All these keywords.
JEL classification:
- A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
- B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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