People discount the future, but also misperceive future valuations by projecting. These misperceptions matter for behavior and affect inferences regarding time preferences.
Intertemporal tradeoffs exist in most economic decisions and are usually interpreted as being guided by time preferences. Using an experiment and surveys, this paper shows that projective misperceptions–the tendency to project either one's current valuation or informational state onto the future–generate behavior that can be systematically misattributed to time preferences. The experiment randomizes the state in which individuals make intertemporal choice, while holding constant the time horizons in a real-effort setting. Results show that the decision state, rather than time discounting, is the primary driver of individuals’ choices, and that the time preference parameter inferred from experimental choices over the same time horizon can differ by up to 44 percent, depending on the state. The observed state dependence is largely driven by the projection of informational states and can be mitigated by experience-based learning. I also develop a survey-based measure of projective misperceptions and find that it can meaningfully predict choices in the experiment and self-reported daily behavior, sometimes even better than measures of time preferences, suggesting that projective misperceptions can be seen as a potentially stable trait relevant for decisions across domains.
Consumers prefer sellers who support consumers' values. Sellers anticipate this, and they respond by expressing support for these values but only when there are potential gains from trade.
This paper studies market participants’ concerns about the moral and social values of their counterparts in market exchange. Using a survey, a laboratory experiment, and an online experiment, we investigate whether consumers prefer to purchase from counterparts whose behavior indicates support for the consumers’ values—even when those values are orthogonal to the product or transaction—and whether sellers anticipate and respond to such concerns accordingly. We document two key findings supporting these relationships. First, we find that consumers prefer exchanging and are willing to pay more to exchange with counterparts whose actions express support for the consumers’ values, even when the consumers’ purchasing decisions have no instrumental impact on the promotion of those values. Second, when sellers anticipate the possibility of such exchange, they change their behavior to reflect greater support for the values held by consumers. Our findings thus question the typical assumption of impersonality in market exchange and suggest that the presence of opportunities for gain through market transactions may promote and shape the values that individuals publicly support.
Work in Progress
The Persistent Effect of Biased Narratives (joint with Manwei Liu)
People are swayed by biased narratives, even if they know the bias and the random allocation of these biased narratives. Further consumption of information does not help.
Do biased narratives influence people's attitudes and subsequent consumption of information, even when people have full awareness? In a series of online experiments, we investigate the impact of biased narratives based on the same facts by randomly assigning people to read narratives that are biased toward a random side of a debatable and unfamiliar issue while informing participants about the random assignment. To maximize the chance of counteracting the influence of initial narratives, we also use a novel accuracy-based incentive to encourage participants to read and evaluate further arguments from both sides. We document three main findings. First, participants' attitudes shift toward the standpoint of the biased narrative they are randomly given despite the full awareness. Second, participants do not read all arguments despite being incentivized to do so, and they evaluate arguments aligned with the biased narrative they are randomly given more favorably. Third, due to the biased evaluation, further arguments do not change participants' attitudes induced by the random exposure to biased narratives. Taken together, our results demonstrate a surprisingly persistent influence of biased narratives even though participants are fully aware of the bias.