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Perceptions and Expectations of Price Changes and Inflation: A Review and Conceptual Framework

Lookup NU author(s): Professor Darren Duxbury

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Abstract

Drawing on relevant literature from a diverse range of academic disciplines we present a conceptual framework intended to further our understanding of perceptions and expectations of price changes and inflation. Based on this framework, we provide a detailed review of the literature and an analysis of open issues in current research. The review is primarily concerned with individuals’ perceptions and expectations of price changes and inflation, which can influence individuals’ economic behaviour (e.g. spending and saving decisions). The main insight from the review is that while consumers may have a limited ability to store and recall specific prices, and even succumb to a number of biases in the way in which they form perceptions and expectations of global price changes, they do seem to have some feel for, and ability to judge and forecast, inflation. How they achieve this, however, is still an open question, although plausible explanations have been proposed. While much important research has been undertaken and significant progress made in our understanding of the psychology of inflation, there remain many unanswered questions and interesting avenues for future research, which are discussed in the final part of the paper.


Publication metadata

Author(s): Ranyard R, Bonini N, Del Missier F, Duxbury D, Summers B

Publication type: Article

Publication status: Published

Journal: Journal of Economic Psychology

Year: 2008

Volume: 29

Issue: 4

Pages: 378-400

ISSN (print): 0167-4870

ISSN (electronic): 1872-7719

Publisher: Elsevier

URL: http://dx.doi.org/10.1016/j.joep.2008.07.002

DOI: 10.1016/j.joep.2008.07.002

Notes: The above paper was awarded a “Citation of Excellence” as one of the top 50 papers worldwide (out of 15,000) in 2008 by Emerald Management Reviews.


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