Previous studies have demonstrated that exponential growth functions are grossly underestimated by human subjects. The extent to which this underestimation depends on past experience was investigated in the present study, in which subjects were required to estimate future prices of a product based on a given rate of inflation. The subjects were drawn from two different populations (Canada and Israel) which had been exposed to radically different rates of inflation during the last few years. Underestimation of the growth function (i.e., the inflation rate) was observed for all subjects, but there was a significant (not just in the statistical sense) difference between subjects, depending on the population from which they were drawn. The magnitude of underestimation for Israeli subjects was significantly smaller, a result that was confirmed in an additional experiment (after the change in the Israeli monetary unit). The results are discussed within the framework of subjective scales of numbers.
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Keren, G. Cultural differences in the misperception of exponential growth. Perception & Psychophysics 34, 289–293 (1983). https://doi.org/10.3758/BF03202958
- Exponential Growth
- Inflation Rate
- Subjective Scale
- Ecological Validity
- Future Price