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Heaping at Round Numbers on Financial Questions : The Role of Satisficing

Author

Listed:
  • Gideon, Michael
  • Helppie-McFall, Brooke
  • Hsu, Joanne W.

Abstract

Survey responses to quantitative financial questions frequently display strong patterns of heaping at round numbers. This paper uses two studies to examine variation in rounding across questions and by individual characteristics. Rounding was more common for respondents low in ability, for respondents low in motivation, and for more difficult questions, all consistent with theories of satisficing. Questions that require more difficult information retrieval and integration of information exhibit more heaping. The use of records, which lowers task difficulty, reduces rounding as well. Higher episodic memory is associated with less rounding, and standard measures of motivation are negatively associated with rounding. These relationships, along with the fact that longer response latencies are associated with less rounding, all support the idea that rounding is a manifestation of satisficing on open-ended financial questions. Rounding patterns also appear remarkably similar across the two studies, despite being fielded in different modes and employing different question order and wording.

Suggested Citation

  • Gideon, Michael & Helppie-McFall, Brooke & Hsu, Joanne W., 2017. "Heaping at Round Numbers on Financial Questions : The Role of Satisficing," Finance and Economics Discussion Series 2017-006, Board of Governors of the Federal Reserve System (US).
  • Handle: RePEc:fip:fedgfe:2017-06
    DOI: 10.17016/FEDS.2017.006
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    File URL: https://www.federalreserve.gov/econresdata/feds/2017/files/2017006pap.pdf
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    References listed on IDEAS

    as
    1. Paul Ruud & Daniel Schunk & Joachim Winter, 2014. "Uncertainty causes rounding: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 17(3), pages 391-413, September.
    2. Baumol, William J, 1979. " On the Contributions of Herbert A. Simon to Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(11), pages 74-82.
    3. Manski, Charles F. & Molinari, Francesca, 2010. "Rounding Probabilistic Expectations in Surveys," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(2), pages 219-231.
    4. Joanne W. Hsu, 2016. "Aging and Strategic Learning: The Impact of Spousal Incentives on Financial Literacy," Journal of Human Resources, University of Wisconsin Press, vol. 51(4), pages 1036-1067.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Consumer surveys; Data collection and estimation; Satisficing;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods

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