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Certainty and overconfidence in future preferences for food

Thunstrom, Linda; Nordström, Jonas LU and Shogren, Jason F. (2015) In Journal of Economic Psychology 51. p.101-113
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% of subjects can predict future choices accurately, while stated certainty of future preferences (one and two weeks ahead) is around 80%. We define overconfidence... (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% of subjects can predict future choices accurately, while stated certainty of future preferences (one and two weeks ahead) is around 80%. 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. Published by Elsevier B.V. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Preference uncertainty, Overconfidence, Experiment, Future preferences
in
Journal of Economic Psychology
volume
51
pages
101 - 113
publisher
Elsevier
external identifiers
  • wos:000366766200008
  • scopus:84943395543
ISSN
1872-7719
DOI
10.1016/j.joep.2015.09.006
language
English
LU publication?
yes
id
6e301241-b95a-4b74-8143-739372d52f12 (old id 8551716)
date added to LUP
2016-01-27 12:55:42
date last changed
2017-01-01 03:05:22
@article{6e301241-b95a-4b74-8143-739372d52f12,
  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% of subjects can predict future choices accurately, while stated certainty of future preferences (one and two weeks ahead) is around 80%. 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. Published by Elsevier B.V.},
  author       = {Thunstrom, Linda and Nordström, Jonas and Shogren, Jason F.},
  issn         = {1872-7719},
  keyword      = {Preference uncertainty,Overconfidence,Experiment,Future preferences},
  language     = {eng},
  pages        = {101--113},
  publisher    = {Elsevier},
  series       = {Journal of Economic Psychology},
  title        = {Certainty and overconfidence in future preferences for food},
  url          = {http://dx.doi.org/10.1016/j.joep.2015.09.006},
  volume       = {51},
  year         = {2015},
}