Projection Bias in the Car and Housing Markets / Meghan R. Busse, Devin G. Pope, Jaren C. Pope, Jorge Silva-Risso.

Format:

Book

Author/Creator:

Busse, Meghan R.

Contributor:

National Bureau of Economic Research.

Pope, Devin G.

Pope, Jaren C.

Silva-Risso, Jorge.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18212.

NBER working paper series no. w18212

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

Projection bias is the tendency to overpredict the degree to which one's future tastes will resemble one's current tastes. We test for evidence of projection bias in two of the largest and most important consumer markets - the car and housing markets. Using data for more than forty million vehicle transactions and four million housing purchases, we explore the impact of the weather on purchasing decisions. 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.

Notes:

Print version record

July 2012.