Working Paper Series

Naiveté, Projection Bias, and Habit Formation in Gym Attendance

Authors

  • Daniel J. Acland, Goldman School of Public Policy, University of California, Berkeley
  • Matthew Levy, London School of Economics

History

  • Goldman School of Public Policy Working Paper (December 2013)

Abstract

We develop a model capturing habit formation, projection bias, and present bias, and conduct a fi eld experiment to identify its main parameters. We implement an exogenous habit-formation intervention, and elicit subjects' predictions of post-treatment gym attendance: projection-biased subjects will underestimate habit-formation; naive present-biased subjects will overestimate attendance. We fi nd subjects form a signi cant short-run habit, but appear not to predict this habit ex-ante. Approximately one-third of subjects formed a habit, equivalent on average to the e ect of a $2.60 per-visit subsidy. Their predictions correspond to 90%  projection bias. The small post-treatment incentives involved in our elicitation mechanism appear to crowd-out the new habit, as subjects appear to correctly predict. Subjects greatly over-predict future attendance, which we interpret as evidence of partial naivete with respect to present bias: they appear to expect their future selves to be two-thirds less present biased" than they currently are. The combination of naivete and projection bias helps explain limited take-up of commitment devices by dynamically inconsistent agents, and points to new forms of contracts.

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