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...

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 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...