The Tendency to Overestimate What Others Will Pay

Thursday, January 12, 2012

Credit Card (Flickr: The Consumerist)

The Journal of Consumer Research recently published a study called "Overestimating Others' Willingness to Pay" which outlines the "overvaluing bias": the tendency to overvalue what another person would pay by nearly 40 percent. While this phenomenon is not new to social psychologists, it clearly influenced the years of easy credit and has more broadly moved Americans away from cash to credit cards.

Louise Story is Wall Street and finance reporter for our partner The New York Times.

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Louise Story

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