Abstract: Money illusion refers to a cognitive bias that people have a tendency to think in terms of currency nominal value rather than real value in transactions. Money illusion affects people’s behaviors of consumption and investment. Many studies have shown that money illusion is widespread in real estate investment, stock investment, organizational management, donation and other fields. Currently, the researchers have used decision framework, anchoring and adjusting heuristic, numerosity heuristic and neural psychological mechanism to illustrate the formation mechanism of money illusion. The researchers have found those factors which influence money illusion, such as mood, currency exchange rate, inflation rate, emotional attachment and previous experience. The direction for future study on money illusion is suggested on following three aspects: deeply investigating the psychological mechanisms and influential factors of money illusion and exploring the coping strategies of money illusion.

Key words: money illusion, decision framework, anchoring and adjusting heuristic, numerosity heuristic