Frequency bias in consumers' perceptions of inflation: An experimental study
Georganas, S., Healy, P.J. & Li, N. (2014). Frequency bias in consumers' perceptions of inflation: An experimental study. European Economic Review, 67, pp. 144-158. doi: 10.1016/j.euroecorev.2014.01.014
Abstract
We investigate whether the perception of economy-wide inflation is affected by the frequency with which various goods’ prices are observed. We provide novel experimental evidence that consumers’ perceptions of aggregate inflation are systematically biased toward the perceived inflation rates of the frequently purchased items. This ‘frequency bias’ may affect consumers’ consumption and investment decisions, and thus have important macroeconomic consequences. It may also explain why consumers typically over-estimate inflation in surveys during periods where frequently-purchased non-durable goods are inflating faster than durables.
| Publication Type: | Article |
|---|---|
| Subjects: | H Social Sciences > HB Economic Theory |
| Departments: | School of Policy & Global Affairs > Economics |
| SWORD Depositor: |
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