MONEY ILLUSION AND THE FINANCIAL AND ACCOUNTING INFORMATION

Abstract

This paper analyses the results of an experiment conducted to evaluate the impact of the phenomenon known as money illusion in the accounting field. This experiment partially replies, with the necessary adaptations, the one carried out by Shafir, Diamond, and Tversky in 1997 that was pioneer in the psychological approach of this phenomenon. This experiment, on the contrary of the original one, was done with a sample of people, in principle, more familiarized with thinking in real monetary values (accounting and business administration students), people who, besides that, live in a country that in a recent past came to know high inflations rates. Three decision problems involving economics aspects, formulated based on accounting information, were proposed to these people. The results reveal that the reasoning bias of the original experiment repeated, even in a sample with the characteristics previously described. These results suggest the need of adopting measures to mitigate the impact of this phenomenon in the decision process, measures of not only educative but also of normative nature.