Left-Digit Bias in Household Inflation Expectations

Last registered on June 23, 2025

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Pre-Trial

Trial Information

General Information

Title

Left-Digit Bias in Household Inflation Expectations

RCT ID

AEARCTR-0016243

Initial registration date

June 18, 2025

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

June 23, 2025, 11:52 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

Germany

Region

Primary Investigator

Name

Marcel Garz

Affiliation

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Benjamin Larin

PI Affiliation

Contact Investigator

Additional Trial Information

Status

In development

Start date

2025-09-01

End date

2025-12-31

Keywords

Behavior

Additional Keywords

JEL code(s)

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

We study a neglected mechanism in the formation of inflation expectations: a psychological phenomenon called “left-digit bias.” This bias leads some but not all households and news media to react strongly when inflation crosses salient round numbers, such as 5% and 10%. To explore this argument, we (i) computationally analyze media content, (ii) use causal designs for observational data, (iii) conduct a randomized controlled survey experiment, and (iv) introduce the bias in New-Keynesian models with heterogeneous agents. The project addresses critical gaps in the monetary economics literature and develops guidelines for policymakers regarding communication strategies and monetary policy.

External Link(s)

Registration Citation

Citation

Garz, Marcel and Benjamin Larin. 2025. "Left-Digit Bias in Household Inflation Expectations." AEA RCT Registry. June 23. https://doi.org/10.1257/rct.16243-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

Intervention (Hidden)

In the initial rounds of the forecasting exercise, all participants see the same information. In the final round, participants in the control group see an inflation rate just below a round-number threshold (e.g., 9.9%), while participants in the first treatment arm see a value just above this threshold (e.g., 10.1%). In the second treatment arm, participants also see a value just above this threshold but are additionally informed that this value is the highest in several years.

Intervention Start Date

2025-09-01

Intervention End Date

2025-12-31

Primary Outcomes

Primary Outcomes (end points)

Qualitative and quantitative inflation expectations in the final round of the forecasting exercise.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

We conduct a randomized controlled survey experiment to evaluate the effects of exposing participants to information about the inflation rate on their inflation expectations, following Fuster and Zafar’s (2023) guidelines for information provision experiments on economic expectations. The survey experiment comes in the form of an inflation forecasting exercise (Salle et al., 2023) consisting of several rounds of forecasting. In each round, participants see real information about the past inflation rate, based on which they are asked to forecast the future inflation rate. The information treatments are designed to test for left-digit bias of participants when they process numerical information about the inflation rate, as well as the impact of framing an increase in the inflation rate as inflation breaking a historical record.

Experimental Design Details

Randomization Method

coin flip

Randomization Unit

individual

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

1,500 survey participants

Sample size: planned number of observations

1,500 survey participants

Sample size (or number of clusters) by treatment arms

500 participants control, 500 participants treatment arm 1, 500 participants treatment arm 2

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

We assume a standard deviation of 3.4 percentage points of the measure of quantitative inflation expectations. With power = 80% and alpha = 0.05, we require approximately 500 observations per experimental arm to detect an effect size of 0.6 percentage points. With one control group and two treatment groups, the total sample size is approximately 1,500 respondents.

Supporting Documents and Materials

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