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Certainty and Overconfidence in Future Preferences for Food

Thunström, Linda; Nordström, Jonas LU and Shogren, Jason (2015) In IFRO Working Paper
Abstract
We examine consumer certainty of future preferences and overconfidence in predicting future preferences. We explore how preference certainty and overconfidence impact the option value to revise today’s decisions in the future. We design a laboratory experiment that creates a controlled choice environment, in which a subject's choice set (over food snacks) is known and constant over time, and the time frame is short -- subjects make choices for themselves today, and for one to two weeks ahead. Our results suggest that even for such a

seemingly straightforward choice task, only 45 percent of subjects can predict future choices accurately, while stated certainty of future preferences (one and two weeks ahead) is around 80 percent. We... (More)
We examine consumer certainty of future preferences and overconfidence in predicting future preferences. We explore how preference certainty and overconfidence impact the option value to revise today’s decisions in the future. We design a laboratory experiment that creates a controlled choice environment, in which a subject's choice set (over food snacks) is known and constant over time, and the time frame is short -- subjects make choices for themselves today, and for one to two weeks ahead. Our results suggest that even for such a

seemingly straightforward choice task, only 45 percent of subjects can predict future choices accurately, while stated certainty of future preferences (one and two weeks ahead) is around 80 percent. We define overconfidence in predicting future preferences as: the

difference between actual accuracy at predicting future choices and stated certainty of future preferences. Our results suggest strong evidence of overconfidence. We find that overconfidence increases with the level of stated certainty of future preferences. Finally, we observe that the option value people attach to future choice flexibility decreases with overconfidence. Overconfidence in future preferences affects economic welfare because it says people have too much incentive to lock themselves into future suboptimal decisions. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
Choice flexibility, Preference uncertainty, Overconfidence, Sub-optimal decisions, Food
in
IFRO Working Paper
issue
4
pages
28 pages
publisher
Department of Food and Resource Economics, University of Copenhagen
external identifiers
  • Scopus:84943395543
language
English
LU publication?
yes
id
bafb13ff-ffb4-4c8b-9f24-270db779d070 (old id 5423589)
date added to LUP
2015-05-25 11:24:31
date last changed
2016-10-13 04:42:19
@misc{bafb13ff-ffb4-4c8b-9f24-270db779d070,
  abstract     = {We examine consumer certainty of future preferences and overconfidence in predicting future preferences. We explore how preference certainty and overconfidence impact the option value to revise today’s decisions in the future. We design a laboratory experiment that creates a controlled choice environment, in which a subject's choice set (over food snacks) is known and constant over time, and the time frame is short -- subjects make choices for themselves today, and for one to two weeks ahead. Our results suggest that even for such a<br/><br>
seemingly straightforward choice task, only 45 percent of subjects can predict future choices accurately, while stated certainty of future preferences (one and two weeks ahead) is around 80 percent. We define overconfidence in predicting future preferences as: the<br/><br>
difference between actual accuracy at predicting future choices and stated certainty of future preferences. Our results suggest strong evidence of overconfidence. We find that overconfidence increases with the level of stated certainty of future preferences. Finally, we observe that the option value people attach to future choice flexibility decreases with overconfidence. Overconfidence in future preferences affects economic welfare because it says people have too much incentive to lock themselves into future suboptimal decisions.},
  author       = {Thunström, Linda and Nordström, Jonas and Shogren, Jason},
  keyword      = {Choice flexibility,Preference uncertainty,Overconfidence,Sub-optimal decisions,Food},
  language     = {eng},
  number       = {4},
  pages        = {28},
  publisher    = {ARRAY(0xacbd468)},
  series       = {IFRO Working Paper},
  title        = {Certainty and Overconfidence in Future Preferences for Food},
  year         = {2015},
}