Weather Can Play Role in Big-Ticket Buying Decisions

By
Shawn Bender
Some people fall into a psychological trap when weighing a purchase. Overwhelmed by their
feelings, influenced by the conditions of the moment, they fail to see how their preferences might
change when those conditions change as well. This state of mind, rooted in a common but
irrational bias, can distort their perception of value. They might be lulled into buying now when
under different circumstances they wouldnt, or they might pay too much.
Bloomberg NewsYou may want to wait for a rainy day to test-drive that convertible.Economists
have tried to place some structure around this notion of projection bias, defined generally as the
tendency to overestimate how much future tastes will match current ones. A formal model by
George Loewenstein, Ted ODonoghue and Matthew Rabin was published in the Quarterly Journal
of Economics in 2003. And more recent research has brought to light its influence on relatively
inexpensive goods like clothing.
But what about big-ticket items? Theres a lot of money tied up in them. Are people similarly
irrational when considering even expensive purchases like these? A recent study says yes, a
finding that suggests just how robust and durable this phenomenon might be.
It turns out that weather conditions at the time of purchase can affect the way people value
houses and cars, two of the bigger purchases they make during their lifetimes, according to a
working paper by economists Meghan R. Busse, Devin G. Pope, Jaren C. Pope and Jorge Silva-Risso.
People are more likely to pay a premium for a house with a swimming pool if they go to contract in
summer heat rather than winter chill, or to fall in love with a convertible on an unseasonably
warm day with clear skies even though the weather at purchase time has little to do with the
value theyll derive from using these things in the long run.
You are overly influenced by how much youre going to like it right now, Busse, an Associate
Professor of Management and Strategy at Northwestern Universitys Kellogg School of
Management, said in an interview. When its sixty in Chicago in February, you dont think its
always going to be sixty. But somehow it just seems like wouldnt be great to own a convertible?
A few people are going to say that really would be a good idea.
In their paper, Projection Bias in the Car and Housing Markets, Busse and her coauthors
analyzed data from 40 million car sales across the country. They tried to isolate unusual weather
conditions as a variable by controlling for factors like seasonal sales patterns. They found that
when the mean temperature was 20 degrees higher than normal in a location, convertible sales as
a proportion of all car sales rose by 0.22 point, with large and significant effects in the spring
and fall. That meant an 8.5% rise in the fraction of convertibles among all car sales. A somewhat

similar finding resulted from their study of four-wheel-drive vehicle sales during times of heavy
snowfall.
In the housing market, they examined four million properties that had been sold at least twice
between 1998 and 2008. They used contract dates the time of decision that were estimated
to have been two months prior to closing. Homes with a pool sold for about $1,600 more on
average in the summer than the winter. The difference couldnt be explained by so-called
immediate utility gains the idea that buyers might have been willing to pay more in the summer
because they could start using the pools right away since there was a lag between the contract
and move-in dates. And further evidence of bias emerged when they looked at houses that were
estimated to have gone to contract in August. Pools added significant value to homes in that
month, even though buyers werent likely to move in until October, when using the pools probably
wouldnt have been an option for them.
It may be difficult to draw sweeping conclusions from just one analysis. But if projection bias is
strong enough to influence at least some of lifes most important buying decisions, then its
worthy of further study, the authors conclude, and may even suggest the need to consider more
laws that create cooling-off periods to protect consumers for whom this kind of bias can trump
reason.
Part of the value of this is just pointing out to consumers that they can be influenced by things,
Busse said. Ask yourself, Do I really want this? Should I wait for another week to see if I want it
then as much as I want it today?