Projection Bias in Predicting Future Utility

George Loewenstein, Ted O'Donoghue and Matthew Rabin

The Quarterly Journal of Economics, 2003, vol. 118, issue 4, 1209-1248

Abstract: People exaggerate the degree to which their future tastes will resemble their current tastes. We present evidence from a variety of domains which demonstrates the prevalence of such projection bias, develop a formal model of it, and use this model to demonstrate its importance in economic environments. We show that, when people exhibit habit formation, projection bias leads people to consume too much early in life, and to decide, as time passes, to consume more—and save less—than originally planned. Projection bias can also lead to misguided purchases of durable goods. We discuss a number of additional applications and implications.

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (449)

Downloads: (external link)
http://hdl.handle.net/10.1162/003355303322552784 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Projection Bias in Predicting Future Utility (2002)
Working Paper: Projection Bias in Predicting Future Utility (2001)
Working Paper: Projection Bias in Predicting Future Utility (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:118:y:2003:i:4:p:1209-1248.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().