City Research Online

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:
[thumbnail of EER-D-12-00388R2.pdf]
Preview
PDF
Download (344kB) | Preview

Export

Add to AnyAdd to TwitterAdd to FacebookAdd to LinkedinAdd to PinterestAdd to Email

Downloads

Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login