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How laypeople and experts misperceive the effect of economic growth

  • Christandl, Fabian
  • Fetchenhauer, Detlef
Registered author(s):

    A series of four experiments were performed to examine the accuracy of estimations of economic growth by both experts and lay people, the factors that influence the accuracy of their estimations, and which procedures they use to make estimations. The results show that for actual growth rates higher than 1%, both groups clearly underestimated growth, and the underestimation was lower for experts than for laypeople. The estimations became slightly better when the task was presented in a financial investment scenario. Incentives had no effect on the accuracy of the estimations; however, a positive influence of the need for cognition was observed. Male participants provided more accurate estimations than female participants. The common use of different, and inappropriate solution procedures, accounted for the under-estimators.

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    File URL: http://www.sciencedirect.com/science/article/B6V8H-4VHSD9T-1/2/4d94254b873b80b379ce80ed51673d68
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    Article provided by Elsevier in its journal Journal of Economic Psychology.

    Volume (Year): 30 (2009)
    Issue (Month): 3 (June)
    Pages: 381-392

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    Handle: RePEc:eee:joepsy:v:30:y:2009:i:3:p:381-392
    Contact details of provider: Web page: http://www.elsevier.com/locate/joep

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    1. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
    2. Rydval, Ondrej & Ortmann, Andreas, 2004. "How financial incentives and cognitive abilities affect task performance in laboratory settings: an illustration," Economics Letters, Elsevier, vol. 85(3), pages 315-320, December.
    3. Gilbert, Daniel T. & Gill, Michael J. & Wilson, Timothy D., 2002. "The Future Is Now: Temporal Correction in Affective Forecasting," Organizational Behavior and Human Decision Processes, Elsevier, vol. 88(1), pages 430-444, May.
    4. Uri Benzion & Yochanan Shachmurove & Joseph Yagil, 2004. "Subjective discount functions - an experimental approach," Applied Financial Economics, Taylor & Francis Journals, vol. 14(5), pages 299-311.
    5. Smith, Vernon L & Walker, James M, 1993. "Monetary Rewards and Decision Cost in Experimental Economics," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 245-61, April.
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