Working Paper: NBER ID: w25540
Authors: Victor Stango; Jonathan Zinman
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.
Keywords: behavioral economics; consumer welfare; sufficient statistics; behavioral biases; decision-making
JEL Codes: C83; D1; D6; D9; E7; G4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| behavioral biases (D91) | consumer welfare (D69) |
| bcounts (Y10) | consumer welfare (D69) |
| bcounts (Y10) | experienced utility (L97) |
| measurement error (C20) | consumer welfare (D69) |
| bcounts stability (C62) | measurement error (C20) |