The Psychological Effect of Weather on Car Purchases

When buying durable goods, consumers must forecast how much utility they will derive from future consumption, including consumption in different states of the world. This can be complicated for consumers since making intertemporal evaluations may expose consumers to a variety of psychological biases such as present bias, projection bias, and salience effects. We investigate whether consumers are affected by such intertemporal biases when they purchase automobiles. Using data for more than forty million vehicle transactions, we explore the impact of weather on purchasing decisions. We find that the choice to purchase a convertible or a 4-wheel drive is highly dependent on the weather at the time of purchase in a way that is inconsistent with classical utility theory. We consider a range of rational explanations for the empirical effects we find, but none can explain fully the effects we estimate. We then discuss and explore projection bias and salience as two primary psychological mechanisms that are consistent with our results. ___________________________________________________ *Busse: Kellogg School of Management, Northwestern University and NBER; D. Pope: Booth School of Business, University of Chicago and NBER; J. Pope: Department of Economics, Brigham Young University; Silva-Risso: School of Business Administration, UC Riverside. We are grateful to Chris Bruegge and Ezra Karger for valuable research assistance. We also thank Stefano DellaVigna, Glenn Ellison, Emir Kamenica, Ulrike Malmendier, Ted O’Donoghue, Loren Pope, Joe Price, Mathew Rabin, Chad Syverson, Dick Thaler, and seminar participants at the Behavioral Economics Annual Meeting, the ISMS Marketing Science Conference, the NBER Summer Institute, the Psychonomic Society Annual Meeting, Brigham Young University, Columbia University, Cornell University, DePaul University, Harvard Business School, Indiana University, MIT, Simon Fraser University, Stanford University, UC Berkeley, UC Los Angeles, UC San Diego, UC Santa Barbara, University of British Columbia, University of Chicago, University of Illinois, University of Kentucky, University of Zurich, the Wharton School, and Yale University for helpful suggestions. We are also very grateful for helpful input from the editors and three anonymous referees.