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In Equations We Trust? Formula Knowledge Effects on the Exponential Growth Bias in Household Finance Decisions
Decision Analysis ( IF 1.703 ) Pub Date : 2017-09-01 , DOI: 10.1287/deca.2017.0351
Bryan Foltice 1 , Thomas Langer 2
Affiliation  

Exponential growth effects play a major role in many household finance decisions. A systematic bias in dealing with exponential growth can lead to poor savings and debt decisions. In this paper, we extend previous research on the exponential growth bias in the savings and debt domains and provide a first experimental link between these two important fields of consumer financial decision making. We develop a measure for the exponential growth bias that naturally extends over different domains and parameter settings, and we explore the ramifications of being acquainted with the basic formula of exponential savings growth. Specifically, we analyze whether such formula knowledge helps only in calculating simple compound interest scenarios with a pocket calculator or if it provides benefits that go beyond this narrow field of application. We observe that—even without a pocket calculator—individuals who know the compound interest formula provide less biased estimates for problems from the savings domain and als...

中文翻译:

在方程式中我们相信吗?公式知识对家庭财务决策中指数增长偏差的影响

指数增长效应在许多家庭财务决策中起着重要作用。在处理指数增长时出现系统性偏见可能导致不良的储蓄和债务决策。在本文中,我们扩展了对储蓄和债务领域指数增长偏差的先前研究,并提供了这两个重要的消费者金融决策领域之间的第一个实验性联系。我们开发了一种指数增长偏差的度量方法,该偏差自然可以扩展到不同的域和参数设置,并且我们探索熟悉指数储蓄增长的基本公式的后果。具体来说,我们分析这种公式知识是否仅有助于使用袖珍计算器计算简单的复利方案,或者是否提供了超出此狭窄应用领域的好处。
更新日期:2017-09-01
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