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

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

doi:10.1016/j.joep.2020.102349

Cited by 10 publications

(8 citation statements)

References 17 publications

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“…For problem 3, our findings were also very close to those of Shafir et al (1997) and Ziano et al (2021). Across all three studies, the problem involving the character 'most likely to sell the armchair and least likely to buy it' demonstrated the presence of the money illusion effect.…”

Section: Discussionsupporting

confidence: 73%

“…In line with previous findings (Shafir et al, 1997;Ziano et al, 2021), prior to conducting analyses for this problem, we combined the Brazilian real (face value currency) and percentage data within the 'buy' and 'sell' conditions. This decision was made because we found no differences when comparing frequencies ("More", "Same", and "Less") for changes described in Brazilian currency and percentage values within each condition (p-value for 'buy' = 0.37 and p-value for 'sell' = 0.38).…”

Section: Problemmentioning

confidence: 94%

“…It was not mandatory to complete all problems; even if only one problem was completed, the data was included in the analysis (for the total sample for each problem, see Table S1). The self-administered questionnaire was created using the Qualtrics XM platform and the structure was adapted from the study conducted by Ziano et al (2021). The questionnaire's link was disseminated through social networks.…”

Section: Introductionmentioning

confidence: 99%

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Replication of the “money illusion” effect in a Brazilian sample

de Moraes Ferreira,

Santiago,

Seda

et al. 2023

Preprint

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Shafir, Diamond, and Tversky (1997, Money illusion, The Quarterly Journal of Economics, 112(2), 341–374) described the phenomenon of money illusion as the inclination to consider money without adequately taking into account the inflation factor, emphasizing nominal values rather than real ones. This study aims to replicate the four conditions outlined in the original research by Shafir and colleagues, adapted to the Brazilian context: problems that include different situations (earnings, transactions, contracts) in which people should make financial decisions that might be affected by money illusion. This cross-sectional and pre-registered study evaluated the money illusion in a sample of 372 Brazilian participants, conducted via mobile phone/computer. Inferential analyses of all problems were performed with the chi-square test (X²), and the results found were very similar to the original findings: depending on the terms used (real, nominal, or neutral framing), participants showed varying inclinations towards opting for economically advantageous opportunities. The present study successfully replicated all four problems, both in the complete sample and the sensitivity analyses, which included only participants who accurately answered the verification questions for each problem. Based on these findings, it is plausible that the money illusion effect may exhibit cultural independence. This assertion is substantiated by the replication of the effect within a distinct cultural context from the original study. To reinforce the empirical basis of this assertion, future investigations should investigate these findings across diverse cultural settings.

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Section: Discussionsupporting

confidence: 73%

Section: Problemmentioning

confidence: 94%

Section: Introductionmentioning

confidence: 99%

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Replication of the “money illusion” effect in a Brazilian sample

de Moraes Ferreira,

Santiago,

Seda

et al. 2023

Preprint

View full text Add to dashboard Cite

show abstract

“…The study's results should also be considered in light of inflationary pressures that are expected to drive prices up following the economic response to the pandemic. Since consumers systematically underestimate the effects of inflation when assessing prices in general (Eyster et al., 2017 ; Kahneman et al., 1986a ; Shafir et al., 1997 ; Shiller, 1997 ; Ziano et al., 2021 ) and when forming perceptions of a product's price fairness (Bolton et al., 2003 ), the role that complex economic forces play is likely, to some degree, to be ignored or underestimated in people's emotional responses to pandemic‐driven price increases. Higher prices that are outside of the control of individual firms and municipalities may, nonetheless, be attributed to intentional markups.…”

Section: Discussionmentioning

confidence: 99%

Context and the Perceived Fairness of Price Increases Coming out of COVID‐19

Chavanne

Danz

Dribssa

et al. 2022

Social Science Quarterly

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As the U.S. economy responds to prolonged COVID-19 disruptions, it is important to understand what factors affect the perceived fairness of pandemic-driven price increases. Methods: Participants read a vignette and rated how fair they found a pandemic-driven price increase. Versions vary (1) the source (hardware-store products or bus fare), (2) the magnitude of the price increase (6 percent or 18 percent), and (3) the tone of an initial description of COVID (positive or negative). Results: The price increase was perceived to be fairer when it involved the hardware store or when it was smaller. The relationship between fairness and magnitude was context-specific, as fairness perceptions were insensitive to the magnitude of the price increase in the bus scenario or when the initial description of COVID had a positive tone. Conclusion: Retailers and municipalities may face different fairness constraints as they consider pandemic-driven price increases. The tone of COVID information may affect price fairness through its impact on sensitivity to magnitude.As more components of economic life open up in the United States in the aftermath of widespread vaccination against COVID-19, pandemic-driven changes in economic conditions will inevitably affect price levels. As shown in the seminal work of Kahneman et al. (1986aKahneman et al. ( , 1986b and Bolton et al. (2003), contextdependent attitudes toward price increases can serve as a constraint that interferes with market-clearing price adjustments. Yet, while the perceived fairness of price increases has been widely studied, businesses and municipalities contemplating price increases have little empirical guidance to help them anticipate public sentiment toward higher prices coming out of a crisis as intense, impactful, and emotionally charged as the COVID-19 pandemic.The analysis presented here examines how the perceived fairness of COVID-19-driven price increases varies across different contexts. It uses different versions of a vignette that describes a price increase, which occurs as the economy opens up following the severe disruptions caused by the pandemic. To study context-dependence, three variables are systematically manipulated within the vignette while all other aspects remain equivalent. First, in light of the diverse types of economic domains that face potential price

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“…For example, it has been demonstrated that 94% of the effects predicted by prospect theory (Kahneman & Tversky, 1979;Tversky & Kahneman, 1992) were successfully replicated (Ruggeri et al, 2020). Also, other classical JDM effects such as money illusion (Ziano et al, 2021), decoy effect (Xiao et al, 2020), status quo bias (Xiao et al, 2021), framing (Zhou et al, 2021), or motivated numeracy (Persson et al, 2021) were subjects of replication and extension studies.…”

Section: Introductionmentioning

confidence: 99%

Conceptual replication study of fifteen JDM effects: Insights from the Polish sample

Sobków¹,

Surowski²,

Olszewska³

et al. 2021

Preprint

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We conducted pre-registered replications of 15 effects in the field of judgment and decision making (JDM). We aimed to test the generalizability of different classical and modern JDM effects, including, among others: less-is-better, anchoring, and framing to different languages, cultures, or current situations (COVID-19 pandemic). Replicated studies were selected and conducted by undergraduate psychology students enrolled in a decision-making course. Two hundred and two adult volunteers completed an online battery of replicated studies. With a classical significance criterion (p < .05), seven effects were successfully replicated (47%), five partially replicated (33%), and three did not replicate (20%). Even though research materials differed from the originals in several ways, the replication rate in our project is slightly above earlier reported findings in similar replication projects.

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

Cited by 10 publications

References 17 publications

Replication of the “money illusion” effect in a Brazilian sample

Replication of the “money illusion” effect in a Brazilian sample

Context and the Perceived Fairness of Price Increases Coming out of COVID‐19

Conceptual replication study of fifteen JDM effects: Insights from the Polish sample

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