Fungibility, Labels and Consumption

Johannes Abeler and Felix Marklein
Additional contact information
Felix Marklein: University of Bonn

No 2010-13, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: Fungibility of money is a central assumption in the theory of consumer choice: any unit of money is substitutable for another. This implies that the composition of income or wealth is irrelevant for consumption. We find in a field experiment that even in a simple, incentivized setup many subjects do not treat money as fungible. When a label is attached to a part of their budget, subjects change consumption according to the label. A controlled laboratory experiment confirms this result and further shows that subjects with lower cognitive abilities are more likely to violate fungibility. The findings lend support to behavioral models of narrow bracketing and mental accounting. One implication of our result is that in-kind benefits distort consumption more strongly than usually assumed.

Keywords: Fungibility; In-kind Benefits; Mental Accounting; Narrow Bracketing; Field Experiment; Laboratory Experiment (search for similar items in EconPapers)
JEL-codes: C91 C93 D01 H31 I38 (search for similar items in EconPapers)
Date: 2010-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
https://www.nottingham.ac.uk/cedex/documents/papers/2010-13.pdf (application/pdf)

Related works:
Journal Article: Fungibility, Labels, and Consumption (2017)
Working Paper: Fungibility, Labels, and Consumption (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:not:notcdx:2010-13

Access Statistics for this paper

More papers in Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Jose V Guinot Saporta ().