We Are All Behavioral, More or Less: Measuring and Using Consumer-Level Behavioral Sufficient Statistics

96 Pages Posted: 28 Feb 2019

See all articles by Victor Stango

Victor Stango

UC Davis Graduate School of Management

Jonathan Zinman

Dartmouth College; Innovations for Poverty Action; Jameel Poverty Action Lab; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: February 8, 2019

Abstract

Can a behavioral sufficient statistic empirically capture cross-consumer variation in behavioral tendencies and help identify whether behavioral biases, taken together, are linked to material consumer welfare losses? Our answer is yes. We construct simple consumer-level behavioral sufficient statistics — “B-counts” — by eliciting seventeen potential sources of behavioral biases per person, in a nationally representative panel, in two separate rounds nearly three years apart. B-counts aggregate information on behavioral biases within-person. Nearly all consumers exhibit multiple biases, in patterns assumed by behavioral sufficient statistic models (a la Chetty), and with substantial variation across people. B-counts are stable within-consumer over time, and that stability helps to address measurement error when using B-counts to model the relationship between biases, decision utility, and experienced utility. Conditional on classical inputs — risk aversion and patience, life-cycle factors and other demographics, cognitive and non-cognitive skills, and financial resources — B-counts strongly negatively correlate with both objective and subjective aspects of experienced utility. The results hold in much lower-dimensional models employing “Sparsity B-counts” based on bias subsets (a la Gabaix) and/or fewer covariates, illuminating lower-cost ways to use behavioral sufficient statistics to help capture the combined influence of multiple behavioral biases for a wide range of research questions and applications.

JEL Classification: C83, D1, D6, D9, E7, G4

Suggested Citation

Stango, Victor and Zinman, Jonathan, We Are All Behavioral, More or Less: Measuring and Using Consumer-Level Behavioral Sufficient Statistics (February 8, 2019). Available at SSRN: https://ssrn.com/abstract=3331285 or http://dx.doi.org/10.2139/ssrn.3331285

Victor Stango

UC Davis Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

Jonathan Zinman (Contact Author)

Dartmouth College ( email )

Hanover, NH 03755
United States
603-646-0075 (Phone)

HOME PAGE: http://https://sites.dartmouth.edu/jzinman/

Innovations for Poverty Action

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Jameel Poverty Action Lab

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National Bureau of Economic Research (NBER)

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