Yvonne Oberholzer

Level: Bachelor or Master

Language: German or English

Short Description: Research has shown that humans are notoriously bad at estimating exponential growth (e.g. Wagenaar and Sagaria, 1975; Wagenaar and Timmers, 1979; Keren, 1983). As a general result, it has been found that humans grossly underestimate it. This has been found to be related to poorer investment decisions affecting household finance (Stango and Zinman, 2009) and suboptimal retirement savings behaviour (McKenzie and Liersch, 2011). The phenomenon was coined Exponential Growth Bias (EGB). Keren (1983) extended these findings by showing that people show a less pronounced underestimation bias if they were exposed to exponential growth in the same domain in their real life (e.g. inflation in Israel and Canada), indicating that there might be a positive effect of individual experience. The goal of the project is to further investigate this influence of domain specificity by asking participants to estimate exponential growth in a familiar scenario (COVID-19) and an unfamiliar scenario (e.g. bunny population growth).

Skills required:

- interest in the topic (number perception, decision making)

- some basic statistics skills (χ2-test, t-test, ANOVA and similar in SPSS or R)

Goals:

As part of the thesis, the student will:

- do a detailed literature review

- get familiar with a programming language (for example javascript)

- conduct an experiment

- do a statistical analysis

- write a thesis according to scientific standards

References:

Keren, G. (1983). Cultural differences in the misperception of exponential growth. Perception & Psychophysics, 34(3), 289–293. https://doi.org/10.3758/BF03202958

Mckenzie, C. R. M., & Liersch, M. J. (2011). Misunderstanding Savings Growth: Implications for Retirement Savings Behavior. Journal of Marketing Research, 48(SPL), S1–S13. https://doi.org/10.1509/jmkr.48.SPL.S1

Stango, V., & Zinman, J. (2009). Exponential Growth Bias and Household Finance. The Journal of Finance, 64(6), 2807–2849. https://doi.org/10.1111/j.1540-6261.2009.01518.x

Wagenaar, Willem A., & Timmers, H. (1979). The pond-and-duckweed problem; Three experiments on the misperception of exponential growth. Acta Psychologica, 43(3), 239–251. https://doi.org/10.1016/0001-6918(79)90028-3

 Wagenaar, William A., & Sagaria, S. D. (1975). Misperception of exponential growth. Perception & Psychophysics, 18(6), 416–422. https://doi.org/10.3758/BF03204114