Journal
MANAGEMENT SCIENCE
Volume 63, Issue 11, Pages 3718-3738Publisher
INFORMS
DOI: 10.1287/mnsc.2016.2524
Keywords
projection bias; salience; extrapolative expectations; behavioral economics; consumer behavior
Funding
- Deutsche Forschungsgemeinschaft [SFB/TR 15, GRK 801]
Ask authors/readers for more resources
The consequences of many economic decisions materialize only in the future. To make informed choices in such decision problems, consumers need to anticipate the likelihood of future states of the world, the state dependence of their preferences, and the choice alternatives that may become relevant. This complex task may expose consumers to psychological biases like extrapolative expectations, projection bias, or salience. We test whether customers are affected by such biases when they buy advance tickets for an outdoor movie theater, a real-world situation that, because of the availability of reliable weather forecasts, closely resembles a stylized decision problem under risk. We find that customers' decisions are heavily influenced by the weather at the time of purchase, even though the latter is irrelevant for the experience of visiting the theater in the future. The empirical evidence cannot be fully explained by a range of candidate rational explanations, but is consistent with the presence of the aforementioned psychological mechanisms.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available