Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7242700 | Journal of Economic Behavior & Organization | 2018 | 39 Pages |
Abstract
The exponential growth bias (EGB) refers to individuals' underestimation of the effects of exponential growth and has been shown to affect important financial decisions such as retirement savings. We develop and test a novel experimental design to evaluate the magnitude of the EGB based on multiple price lists. Our design simultaneously elicits the EGB as well as subjects' utility curvatures and time preferences. Allowing for non-linear utility, we structurally estimate the magnitude of the EGB as about half as large as when linear utility is assumed. These results shed light on the relationship between individual preferences and the EGB.
Related Topics
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Authors
C. Königsheim, M. Lukas, M. Nöth,