Frequency bias in consumers׳ perceptions of inflation: An experimental study

Sotiris Georganas, Paul Healy () and Nan Li

European Economic Review, 2014, vol. 67, issue C, 144-158

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.

Keywords: Inflation perceptions; Biases; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C82 C91 E31 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:67:y:2014:i:c:p:144-158

DOI: 10.1016/j.euroecorev.2014.01.014

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