2003/11/01 by George Loewenstein, Ted O’Donoghue, Matthew Rabin · 1,147 citations
Decision Sciences · Economics, Econometrics and Finance · Business, Management and Accounting · #Decision-Making and Behavioral Economics #Economic theories and models #Consumer Market Behavior and Pricing #George (robot) #Library science #Projection (relational algebra) #Art history #Classics #Computer science #Sociology #Art #Algorithm
paper · open access · doi:10.1162/003355303322552784
published in The Quarterly Journal of Economics 118(4), 1209-1248 (Oxford University Press)
openalex publication_date 2003/11/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04
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.