Are individuals in China prone to money illusion?
We replicate the landmark study of Shafir, Diamond and Tversky (1997) to examine whether individuals in China are prone to money illusion. We find that money illusion is prevalent in China as well. Respondents in the Chinese sample are often somewhat more likely to base decisions on the real monetary value of economic transactions compared to respondents in the U.S. sample. If asked explicitly to evaluate a transaction in terms of happiness or satisfaction instead of economic terms, money illusion among respondents in the Chinese sample is comparable to money illusion among respondents in the U.S. sample.
|Keywords||China, Behavioral economics, Money illusion|
|JEL||Laboratory, Individual Behavior (jel C91)|
|Persistent URL||dx.doi.org/10.1016/j.socec.2014.03.003, hdl.handle.net/1765/76081|
|Series||Econometric Institute Reprint Series , ERIM Top-Core Articles|
|Journal||Journal of Behavioral and Experimental Economics|
Mees, H, & Franses, Ph.H.B.F. (2014). Are individuals in China prone to money illusion?. Journal of Behavioral and Experimental Economics, 51, 38–46. doi:10.1016/j.socec.2014.03.003