Sunspots that matter: behavioral biases in household technology adoption

Résumé

Durable purchases require households to forecast future utility flows, which might be subject to behavioral biases such as projection bias, salience and present bias. I test for such biases in a market where exogenous variations in weather can be directly linked to decision utility: the market for residential rooftop solar. I find that household investment decisions are overly influenced by the current state of sunshine, but not by other weather variables. I consider a large range of rational and behavioral explanations and show that my findings are in line with projection bias. Providing additional evidence on heterogeneous responses to sunshine anomalies, I show that behavioral biases can have an impact on aggregate market demand and should be taken into account for effective policy design.