We Are All Behavioral, More or Less: Measuring and Using Consumer-Level Behavioral Sufficient Statistics

Victor Stango and Jonathan Zinman

No 19-14, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Can a behavioral sufficient statistic empirically capture cross-consumer variation in behavioral tendencies and help identify whether behavioral biases, taken together, are linked to material consumer welfare losses? Our answer is yes. We construct simple consumer-level behavioral sufficient statistics??B-counts??by eliciting seventeen potential sources of behavioral biases per person, in a nationally representative panel, in two separate rounds nearly three years apart. B-counts aggregate information on behavioral biases within-person. Nearly all consumers exhibit multiple biases, in patterns assumed by behavioral sufficient statistic models (a la Chetty), and with substantial variation across people. B-counts are stable within-consumer over time, and that stability helps to address measurement error when using B-counts to model the relationship between biases, decision utility, and experienced utility. Conditional on classical inputs?risk aversion and patience, life-cycle factors and other demographics, cognitive and non-cognitive skills, and financial resources?B-counts strongly negatively correlate with both objective and subjective aspects of experienced utility. The results hold in much lower-dimensional models employing ?Sparsity B-counts? based on bias subsets (a la Gabaix) and/or fewer covariates, illuminating lower-cost ways to use behavioral sufficient statistics to help capture the combined influence of multiple behavioral biases for a wide range of research questions and applications.

Keywords: behavioral bias; consumer spending (search for similar items in EconPapers)
JEL-codes: C83 D1 D6 D9 E7 G4 (search for similar items in EconPapers)
Pages: 98 pages
Date: 2019-02-22
New Economics Papers: this item is included in nep-cbe and nep-upt
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Citations: View citations in EconPapers (13)

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Working Paper: We are all Behavioral, More or Less: Measuring and Using Consumer-level Behavioral Sufficient Statistics (2019)
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DOI: 10.21799/frbp.wp.2019.14

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