# 11-149/4 (2011-10-14; 2014-03-25)

Heleen Mees, New York University, Wagner Graduate School of Public Service, United States; Philip Hans Franses, Erasmus University Rotterdam, the Netherlands
Money illusion, Experimental economics, Financial behavior, Psychology of money
JEL codes:

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.