Projection Bias

What it is

Michael Conlin and two colleagues tested it in a 2007 paper in the American Economic Review using catalogue orders of cold-weather items. If the temperature on the day of ordering fell by 30 degrees Fahrenheit, the probability that the item would later be sent back rose by 3.95 per cent. The authors read this as projection bias: the cold on the day shaped a decision about months of future use more than it should have.

Meghan Busse and colleagues found the same pattern in a far larger setting. Their 2015 paper in the Quarterly Journal of Economics used more than 40 million vehicle transactions and found that the choice of a convertible or a four-wheel drive depended heavily on the weather at the time of purchase, in a way standard economic theory could not explain. They considered a range of rational explanations, found none fully accounted for the pattern, and proposed projection bias and salience, how vivid a feature seems at the moment of choice, as the likely mechanisms.

This is a different route from mood. In Norbert Schwarz and Gerald Clore's 1983 study, people rated their lives as more satisfying on sunny days because they read their mood as information about their lives. Projection bias works through what people picture themselves needing: a cold morning makes the warm coat seem essential.

In effect

Seasonal and weather-sensitive purchases are where this matters most. Leaving a day between seeing an item and buying it, asking whether you would want it on an ordinary day next month, and reading the returns policy first are sensible defences. None has been tested as an intervention, but each follows from what the field studies found.

What it does not say

Both main studies are observational field data, so they show a pattern consistent with projection bias rather than a direct measure of it, and Busse and colleagues name salience as a second possible mechanism. Returns in the catalogue data stand in for changed minds. No study yet has measured both mood and expected use on a real shop floor, so the line between projection bias and mood effects on spending, such as Kyle Murray's 2010 finding linking sunlight to spending, is not settled.

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