We Are All Behavioural, More, or Less: A Taxonomy of Consumer Decision-Making

Victor Stango and Jonathan Zinman

The Review of Economic Studies, 2023, vol. 90, issue 3, 1470-1498

Abstract: We examine how 17 behavioural biases relate to each other, to three standard measures of risk and time preferences, to cognitive skills, personality, and demographics, and to outcomes in household finance, well-being, and health. Most consumers in our nationally representative panel data exhibit multiple biases, with substantial cross-person heterogeneity. Biases are positively correlated within person, especially after adjusting for measurement error. From that correlation structure, we reduce our 20 bias and standard preference measures to four behavioural common factors. Each BCF reflects a group of related biases regarding beliefs, decision quality, discounting, or risk/uncertainty attitudes. The first two BCFs also strongly correlate with each other (positively) and cognitive skills (negatively). The first three BCFs and cognitive skills strongly correlate with various outcomes in the expected directions. Our results support processing-based models where basic limitations in cognition and/or attention produce multiple biases, and they have several other implications for theory and practice.

Keywords: Behavioural economics; Multiple biases; Factor analysis; Measurement error instrumental variables; Risky choice; Intertemporal choice; C36; C81; D90; E70 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (10)

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Working Paper: We are all Behavioral, More or Less: A Taxonomy of Consumer Decision Making (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:90:y:2023:i:3:p:1470-1498.

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