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Spotlight: TRiSS Postgraduate Research Fellowships 2019/20


Féidhlim McGowan from the Department of Economics was awarded a Postgraduate Research Fellowship for his project entitled: Measuring 'Accumulation Bias' in Judgments of Household Bills. He describes his project as follows:

Many economic decisions require perception and integration of sequential numerical information. Because cognitive resources are limited, this integration is often performed intuitively, rather than analytically as one would expect from a computer or 'rational agent'.

Intuitions are not precise - is this a problem? Not if the errors are random, so they cancel out in the aggregate. But intuitions are often systematically biased in one direction. In these scenarios, biases that result from relying on intuition can have important economic consequences.

This research project explores one area of potential consequence. Does a bias in how sequences of numbers are perceived affect the accuracy of judgment for the annual cost of regular bills? Psychology studies report a tendency for underestimation of the average and total of numerical sequences. The "pennies-a-day" pricing strategy in marketing suggests a similar underestimation bias. However, survey evidence found overestimation of annual electricity bills. I propose an experiment to test explanations for the opposing directions of estimation bias in experimental versus survey settings.

This research has theoretical relevance for the 'puzzle' of low switching rates, and may contribute to the policy discussion on whether pricing strategies are benign or if they can inhibit informed decision-making.