Tuesday, July 17, 2012

Projection bias in the car and houseing markets

An interesting paper tested project bias/how people over-predicted the degree to which their future tastes will resemble one's current tastes ("never shop on an empty stomach!"). 

"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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