In a nationally-representative sample, we predict retirement savings using survey-based elicitations of exponential-growth bias (EGB) and present bias (PB). We find that EGB, the tendency to neglect compounding, and PB, the tendency to value the present over the future, are highly significant...

In a nationally-representative sample, we predict retirement savings using survey-based elicitations of exponential-growth bias (EGB) and present bias (PB). We find that EGB, the tendency to neglect compounding, and PB, the tendency to value the present over the future, are highly significant...

There is increasing evidence that people underestimate the magnitude of compounding interest. However, if people were aware of their inability to make such calculations they should demand services to ameliorate the consequences of such deficiencies. In a laboratory experiment we find that people...

Exponential-growth bias (EGB) is the tendency for individuals to partially neglect compounding of exponential growth. We develop a model wherein biased agents misperceive the intertemporal budget constraint, and derive conditions for overconsumption and dynamic inconsistency. We construct an...

Exponential-growth bias is the tendency to neglect the compounding of interest. The economics literature has used the fact that a biased agent in many circumstances will underestimate the value of assets that grow according to compound interest. We show that the opposite can also be true. It is...

Exponential-growth bias (EGB) is the tendency to neglect the power of compounding inter- est. A person with EGB will misperceive the intertemporal budget constraint, overestimating lifetime wealth and underestimating the differences in the cost of consumption across periods . We test four...

Exponential-growth bias is the tendency for individuals to underestimate exponential growth due to neglecting the role of compounding. We run an online study to measure the extent of exponential-growth bias in a representative sample of the U.S. population. We measure the effects of a simple...