We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Misperception of Exponential Growth: Are People Aware of Their Errors?
- Authors
Cordes, Henning; Foltice, Bryan; Langer, Thomas
- Abstract
Previous research shows that individuals make systematic errors when judging exponential growth, which has harmful effects for their financial well-being. This study analyzes how far individuals are aware of their errors and how these errors are shaped by arithmetic and conceptual problems. Whereas arithmetic problems could be overcome using computational assistance like a pocket calculator, this is not the case for conceptual problems, a term we use to subsume other error drivers like a general misunderstanding of exponential growth or overwhelming task complexity. In an incentivized experiment, we find that participants strongly overestimate the accuracy of their intuitive judgment. At the same time, their willingness to pay for arithmetic assistance is too high on average, often much above the actual benefits a calculator provides. Using a multitier system of task complexity we can show that the willingness to pay for arithmetic assistance is hardly related to its benefits, indicating that participants do not really understand how the interplay of arithmetic and conceptual problems shape their errors in exponential growth tasks. Our findings are relevant for policymaking and financial advisory practice and can help to design effective approaches to mitigate the detrimental effects of misperceived exponential growth.
- Subjects
EXPONENTIAL functions; WILLINGNESS to pay; ARITHMETIC
- Publication
Decision Analysis, 2019, Vol 16, Issue 4, p261
- ISSN
1545-8490
- Publication type
Article
- DOI
10.1287/deca.2019.0395