The paper "Projection Bias in Predicting Future Utility" by George Loewenstein, Ted O'Donoghue, and Matthew Rabin explores the tendency of people to underappreciate how their own behavior and exogenous factors affect their future utility, leading to an exaggeration of the similarity between current and future preferences. The authors present evidence of this "projection bias" and develop a formal model to analyze its descriptive and welfare implications. The model helps explain behavioral anomalies such as the endowment effect and suboptimal patterns of behavior like addiction and excessive pursuit of material standards of living. The paper also suggests potentially welfare-improving policies, such as mandatory "cooling-off periods" for certain consumer decisions. The authors review extensive evidence for projection bias, including studies on hunger, sexual arousal, and adaptation to life changes. They then present a formal model where individuals maximize perceived intertemporal utility, taking into account their current state and future states. The model is illustrated through examples, such as food choices and the endowment effect, to show how projection bias affects decision-making. The paper concludes by discussing the broader economic implications of projection bias.The paper "Projection Bias in Predicting Future Utility" by George Loewenstein, Ted O'Donoghue, and Matthew Rabin explores the tendency of people to underappreciate how their own behavior and exogenous factors affect their future utility, leading to an exaggeration of the similarity between current and future preferences. The authors present evidence of this "projection bias" and develop a formal model to analyze its descriptive and welfare implications. The model helps explain behavioral anomalies such as the endowment effect and suboptimal patterns of behavior like addiction and excessive pursuit of material standards of living. The paper also suggests potentially welfare-improving policies, such as mandatory "cooling-off periods" for certain consumer decisions. The authors review extensive evidence for projection bias, including studies on hunger, sexual arousal, and adaptation to life changes. They then present a formal model where individuals maximize perceived intertemporal utility, taking into account their current state and future states. The model is illustrated through examples, such as food choices and the endowment effect, to show how projection bias affects decision-making. The paper concludes by discussing the broader economic implications of projection bias.