Monday, February 9, 2009

The psychology of numbers

My newest obsession with the psychology of economics has found more fuel. Science Daily has a story on how researchers have recently found that people may actually value 100 cents more than 1 dollar.

The researchers used the prisoner's dilemma game, which is similar to the dictator, ultimatum and public goods games I have recently run in Uganda to measure levels of cooperation between members of the NUSAF program I am helping to evaluate. They found that participants (college students) were more likely to cooperate when playing for the same amount of money, but counted in cents, not dollars.

That people value big numbers is probably not a surprise, but when we're talking about changes in action for economically meaningless revaluations, it becomes an interesting problem. For instance, confusing numbers becomes a very serious problem when talking about economic bailouts.

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