Revisiting “money illusion”: Replication and extension of Shafir, Diamond, and Tversky (1997)

Ignazio Ziano, Jie Li, Shue Man Tsun, Hoi Ching Lei, Anvita Anil Kamath, Bo Ley Cheng and Gilad Feldman

Journal of Economic Psychology, 2021, vol. 83, issue C

Abstract: Shafir et al. (1997) described money illusion as people’s inclination to think of money without taking inflation sufficiently into account, i.e., in nominal terms rather than in real terms. We successfully replicated Problems 1 to 4 of Shafir, Diamond, and Tversky’s study (1997) on money illusion (MTurk; N = 604). We found effect sizes in line with the original ones for assessments of income (Problem 1; original: Cramer’s V = 0.26, 95% CI [0.17, 0.37]; replication: V = 0.28 [0.21, 0.36]), transactions (Problem 2; original: 48% [42%, 52%]; replication: 70% [66%, 73%]), sales and consumption (Problem 3; original buy: 38% [33%, 43%]; replication buy: 47% [43%, 51%]; original sell: 43%% [38%, 48%]; replication sell: 43% [39%, 47%]), and contracts (Problem 4; original: V = 0.25 [0.13, 0.42]; replication: V = 0.17 [0.10, 0.25]). With an added extension, we found no support for the notion that knowing about or correctly estimating the inflation rate affected money illusion. We discuss theoretical implications for the study of money illusion and the psychological meaning of inflation, as well as for the understanding of the antecedents of money illusion. All data, code, and materials are available on https://osf.io/rv9mw/.

Keywords: Money illusion; Nominal and real values; Nominal framing; Replication; Judgement and decision making (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167487020301069
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:83:y:2021:i:c:s0167487020301069

DOI: 10.1016/j.joep.2020.102349

Access Statistics for this article

Journal of Economic Psychology is currently edited by G. Antonides and D. Read

More articles in Journal of Economic Psychology from Elsevier
Bibliographic data for series maintained by Catherine Liu ().