Naiveté, Projection Bias, and Habit Formation in Gym Attendance

We develop a model capturing habit-formation, projection-bias, and presentbias in an intertemporal-choice setting, and conduct a field experiment to identify its main parameters. Building on the Charness and Gneezy (2009) paradigm, we incentivize subjects to attend the gym for a month, observe their preand post-treatment attendance relative to a control group, and elicit their preand post-treatment predictions of post-treatment attendance. Presentbiased subjects want their future selves to exercise more than they actually will, and naivete about this bias causes them to over-estimate their future attendance. Projection-biased subjects extend their current state onto their future expectations, and therefore under-estimate any habit-formation effect of our treatment ex-ante. We find subjects form a significant short-run habit, followed by substantial decay caused by the semester break. Importantly, subjects appear not to embed habit formation into their ex-ante predictions. Approximately one-third of subjects formed a habit equivalent to a $2.60 per-visit subsidy, while their predictions correspond to 90% projection bias over the habit formation. Moreover, subjects greatly over-predict future attendance, which we interpret as evidence of partial naivete with respect to present bias: they expect their future selves to be two-thirds less “present biased” than they currently are. ∗The authors would like to thank Stefano DellaVigna, Gary Charness, Uri Gneezy, Teck Hua Ho, Shachar Kariv, Botond Koszegi, Ulrike Malmendier, Matthew Rabin, and seminar participants at UC Berkeley and Harvard for their helpful comments. Financial support was provided by the National Institute on Aging through the Center on the Economics and Demography of Aging at UC Berkeley, grant number P30 AG12839. †University of California, Berkeley. [email protected] ‡Corresponding author. London School of Economics. [email protected]