Projection bias refers to the tendency of individuals to underestimate how changes in their current state affect their future preferences, leading them to mispredict future utility. This bias can result in systematic errors in decision-making, particularly in dynamic environments. The paper presents evidence of projection bias in various contexts, including the underestimation of short-term and long-term changes in preferences, such as those caused by hunger, sexual arousal, or adaptation. It also explores the implications of projection bias for behaviors like overconsumption, addiction, and the endowment effect. The authors develop a formal model of projection bias, where individuals predict their future preferences based on their current state, but they underestimate the magnitude of changes in preferences over time. This model is used to explain phenomena such as the endowment effect, where people value possessions more highly when they own them. The model also suggests that projection bias can lead to suboptimal decisions, such as overconsumption or excessive pursuit of material goods. The paper discusses the welfare implications of projection bias, suggesting that policies such as "cooling-off periods" could help correct errors in decision-making. These periods would allow individuals to reconsider decisions made in "hot" states, where intense emotions may lead to irrational choices. The authors also highlight the importance of understanding the role of states in decision-making, as the definition of states can significantly affect the implications of projection bias. Overall, the paper provides a comprehensive analysis of projection bias, demonstrating its prevalence and impact on economic behavior. It highlights the need for further research and policy considerations to address the effects of this bias on individual and societal well-being.Projection bias refers to the tendency of individuals to underestimate how changes in their current state affect their future preferences, leading them to mispredict future utility. This bias can result in systematic errors in decision-making, particularly in dynamic environments. The paper presents evidence of projection bias in various contexts, including the underestimation of short-term and long-term changes in preferences, such as those caused by hunger, sexual arousal, or adaptation. It also explores the implications of projection bias for behaviors like overconsumption, addiction, and the endowment effect. The authors develop a formal model of projection bias, where individuals predict their future preferences based on their current state, but they underestimate the magnitude of changes in preferences over time. This model is used to explain phenomena such as the endowment effect, where people value possessions more highly when they own them. The model also suggests that projection bias can lead to suboptimal decisions, such as overconsumption or excessive pursuit of material goods. The paper discusses the welfare implications of projection bias, suggesting that policies such as "cooling-off periods" could help correct errors in decision-making. These periods would allow individuals to reconsider decisions made in "hot" states, where intense emotions may lead to irrational choices. The authors also highlight the importance of understanding the role of states in decision-making, as the definition of states can significantly affect the implications of projection bias. Overall, the paper provides a comprehensive analysis of projection bias, demonstrating its prevalence and impact on economic behavior. It highlights the need for further research and policy considerations to address the effects of this bias on individual and societal well-being.