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Misperception Of Exponential Growth: Are People Aware Of Their Errors?, Henning Cordes, Bryan Foltice, Thomas Langer
Misperception Of Exponential Growth: Are People Aware Of Their Errors?, Henning Cordes, Bryan Foltice, Thomas Langer
Scholarship and Professional Work - Business
Previous research shows that individuals make systematic errors when judging exponential growth, which has harmful effects for their financial well-being. This study analyzes in how far individuals are aware of their errors and how these errors are shaped by arithmetic and conceptual problems. While arithmetic problems could be overcome by employing 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 …
Exponential Growth Bias Matters: Evidence And Implications For Financial Decision Making Of College Students In The U.S.A., Bryan Foltice, Thomas Langer
Exponential Growth Bias Matters: Evidence And Implications For Financial Decision Making Of College Students In The U.S.A., Bryan Foltice, Thomas Langer
Scholarship and Professional Work - Business
This paper tests the exponential growth bias of undergraduate students at a top-level university in the United States and explores the potential drivers of this bias. We find that bias matters, even for college students, in making savings and debt decisions. In this sample, we observe that the individuals who have already taken on debt are more biased, while those who have experience with savings products are less biased. Moreover, those classified as possessing an awareness of compound growth as well as an ability to consistently calculate the compound savings equation are significantly less biased in different savings treatments than …
How To Decrease The Amortization Bias: Experience Vs. Rules, Bryan Foltice
How To Decrease The Amortization Bias: Experience Vs. Rules, Bryan Foltice
Scholarship and Professional Work - Business
We conduct an experimental study that tests the effectiveness of de-biasing a certain form of exponential growth bias found in household finance debt decisions, called the amortization bias. We provide 251 bachelor students at a German university with a short tutorial based on one of three learning methods: experiential learning, learning a simple “I Owe More” debt rule-of-thumb, as well as learning an extended, but more accurate version of the “I Owe More” debt rule. Immediately after completing these tutorials, we retest for the amortization bias and find a significant bias improvement in all three treatments. More importantly, after confronting …