Individuals Exhibit the Planning Fallacy for Time But Not for Money
Stephen A. Spiller
University of California, Los Angeles (UCLA) - Anderson School of Management
John G. Lynch Jr.
University of Colorado-Boulder, Leeds School of Business - Center for Research on Consumer Financial Decision Making
February 20, 2010
People underestimate how long it takes to complete various projects. Researchers have proposed that this planning fallacy extends to underestimation of money expenditures as well, though empirical work has focused on the planning fallacy for time. In three studies, we find that participants acknowledge smaller, less frequent planning fallacies for money than for time, that participants do not exhibit a planning fallacy for money but do for time, and that this difference between money and time is mediated by resource-specific propensity to plan. Individuals generally plan more for time than for money, and those who plan more for a given resource exhibit a greater planning fallacy. This ironic effect of planning is consistent with the prior literature on “inside” thinking about successful execution of the plan versus “outside” thinking about events external to the plan.
Number of Pages in PDF File: 21
Keywords: planning fallacy
JEL Classification: D1, D84
Date posted: August 22, 2009 ; Last revised: January 30, 2013