Biased income expectations and debt taking

Last registered on December 13, 2017


Trial Information

General Information

Biased income expectations and debt taking
Initial registration date
December 12, 2017

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
December 13, 2017, 1:23 PM EST

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



Primary Investigator

DIW Berlin

Other Primary Investigator(s)

Additional Trial Information

In development
Start date
End date
Secondary IDs
The aim of this experiment is to test whether biased income expectations due to overconfidence lead to higher levels of debt-taking. We exogenously vary subject’s income expectation by letting income depend on relative performance (rank) in hard and easy quiz tasks. The so called “hard easy gap” leads us to expect that subjects have higher income expectations in the easy task than in the hard task. Before subjects receive feedback on their income they can make consumption decisions using a loan. In a third treatment we assign income randomly in order to assess how much debt subjects take out when they have unbiased information over expected income. Additionally we measure subject’s risk preferences, self-control, and financial literacy.
External Link(s)

Registration Citation

Grohmann, Antonia. 2017. "Biased income expectations and debt taking." AEA RCT Registry. December 13.
Former Citation
Grohmann, Antonia. 2017. "Biased income expectations and debt taking." AEA RCT Registry. December 13.
Experimental Details


Three treatment groups:
i) hard quiz
ii) easy quiz
iii) random

We have a battery of 24 general knowledge questions for both the heard and the easy treatment. The questions correspond in domain between treatments. We have randomly drawn 4 sample questions that are presented to subjects as part of the instructions. In the random treatment, subjects see no sample questions and are informed that their income is determined randomly. The distribution of income is the same for all treatments.
Intervention Start Date
Intervention End Date

Primary Outcomes

Primary Outcomes (end points)
Amount of debt-taking: There are three shopping rounds, during which subjects have the opportunity to spend their earned income. The first shopping round takes place before subjects work on the first quiz round, i.e., before they have earned any income. They can take out a loan against their future income. We model the time-value of money by increasing prices of goods over subsequent rounds. Subjects know prices in each round already in the first round.

Income expectation: We elicit income expectations, after subjects have been primed by the sample questions. We ask for income expectation in terms of a €-value and in terms of probabilities for each rank.

Moreover, we elicit risk preferences, financial literacy and self-control.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
At the beginning of the experiment, participants receive detailed instructions about the experiment. The instructions contain information on how money can be earned, how it can be spend, and how debt can be taken out. Subjects begin the experiment after answering a comprehension test.
Following this, four sample questions of the quiz task are shown which reflect the difficulty of the quiz (easy/hard) since they were randomly drawn from the pool of questions.
Income expectations
Income is determined by the relative performance in the quiz task in groups of eight subjects. After the instructions, income expectations are elicited. We ask for the income expectation in terms of a Euro value and in terms of probabilities to be in each rank.
Importantly, income expectations are not incentivized to avoid strategic behavior in the quiz tasks.
All markets (rounds 1, 2, 3) have the same structure. A total of ten goods are on display, which can be purchased. The goods are real goods (sweets, beverages, pens) that are handed out to subjects at the end of the experiment depending on their purchases. The current price for each good is shown as well as the future prices in the remaining rounds. Prices for goods increase substantially over time. Within the market screen, participants see their account balance and their current loan. If income does not suffice their account balance is negative. In market 2 it is again possible to take out debt. In market 3 no further debt can be taken, but all earned funds can be spent.
Quiz task
In each round of the quiz subjects are asked ten general knowledge questions. The questions are taken from a broad range of topics and are asked in a multiple choice format. The performance ranking builds on the number of correct responses with completion times as a tie-breaker.
Experimental Design Details
Randomization Method
Computerized randomization. All treatments occur within each experimental session (3 x 8 subjects).
Randomization Unit
Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters
288 Individuals
Sample size: planned number of observations
288 Individuals
Sample size (or number of clusters) by treatment arms
Equal allocation to treatments. 288/3 = 96.

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Debt taking round 1 hard/easy: 40

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number


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