An Empirical Exploration of Mental Representations in the Individual Saving Decision Process

Introduction

A great part of the recent behavioral literature on savings is dedicated to the problem of intertemporal choice and on how our time preferences are really discounted (Frederick et al., 2002, Prelec, 2004). Even if these developments are very illuminating in terms of pointing out our inherent time inconsistencies and negative consequences for our wellbeing, they usually lack is the step forward for their proper integration in some more generalized recommendations or more sound public policies.

In order to fill this gap we have taken a step back in order to understand the entire process and for that we have made appeal to the mental representation of a specific category of decisions, usually prone to be time inconsistent, and posing great social costs – saving decisions.

While nowadays it is an accepted claim that the general understanding of economic phenomena is based on mental representations, the role played by these representations is yet unclear in relation with decision-making and as a consequence it is an underexplored research topic, even in the behavioral economics literature.

In our opinion, the most plausible explanation for this state of facts resides in the volatile nature of these representations that makes it hard to operationalize them in well-defined variables. This is of course a founded take on the matter but at the same time it underlines the opportunities for conducting extensive analyses on this more neglected area of decisional mechanisms, in comparison with the popular fast and frugal heuristics.

The paper aims to analyze how these representations interact for students of different specializations (Business Administration and Sociology). In order to achieve this, the proposed path consists in partially adapting and refining a research methodology initially used for the elicitation of mental representation for the case of expected inflation (Svenson & Nilsson, 1986).

The mental representations of the saving process and saving decisions are particularly interesting in the era of debt and overconsumption society (Leiser et al.,2008; Allen et al.,2005;Verges,1998) and their analysis is far from being only of a conceptual importance, given the fact that a proper identification of them may lead us to a better understanding of saving decisions (determinant factors and motivations) for different groups of individuals and of potential sources of conflict. Furthermore, it can hopefully constitute a more solid basis for designing effective saving plans, financial education programs and also for the use of nudges (if we find a coherent set of mental representations the nudge will be for effective in terms of ease of implementations and expected results).