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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 …