The “percentage fallacy” is a real thing, and it does get covered in standard JDM/behavioral economics. See the classic Kahneman & Tversky jacket-calculator study, for instance. K&T also cite a study which shows that if you compare the prices of a consumer good at various stores, the standard deviation in price is roughly proportional to the price of the good.
I don’t think it has a handy name, but the money version ($20 out of $2500 or $40) usually gets covered under mental accounting, as reflecting the shape of the value function (diminishing marginal sensitivity). It also gets connected more broadly to Weber’s Law in psychophysics, which basically says that people’s perceptions of a continuous quantity (including weight, brightness, etc.) follow a log scale—e.g., if someone is holding a weight and you add more weight to it, the smallest change that they’ll notice is proportional to the total amount of weight that they’re holding.
There has been some research applying this to temporal discounting, including a recent paper by Zauberman & colleagues (pdf).
Zauberman, G. B., Kim, K., Malkoc, S., & Bettman, J. R. (2009). Discounting time and time discounting: Subjective time perception and intertemporal preferences. Journal of Marketing Research, 46, 543–556.
The “percentage fallacy” is a real thing, and it does get covered in standard JDM/behavioral economics. See the classic Kahneman & Tversky jacket-calculator study, for instance. K&T also cite a study which shows that if you compare the prices of a consumer good at various stores, the standard deviation in price is roughly proportional to the price of the good.
I don’t think it has a handy name, but the money version ($20 out of $2500 or $40) usually gets covered under mental accounting, as reflecting the shape of the value function (diminishing marginal sensitivity). It also gets connected more broadly to Weber’s Law in psychophysics, which basically says that people’s perceptions of a continuous quantity (including weight, brightness, etc.) follow a log scale—e.g., if someone is holding a weight and you add more weight to it, the smallest change that they’ll notice is proportional to the total amount of weight that they’re holding.
There has been some research applying this to temporal discounting, including a recent paper by Zauberman & colleagues (pdf).
Zauberman, G. B., Kim, K., Malkoc, S., & Bettman, J. R. (2009). Discounting time and time discounting: Subjective time perception and intertemporal preferences. Journal of Marketing Research, 46, 543–556.
I usually refer to this as “thinking logarithmically”.