Mental Accounts and the Marginal Propensity to Give

David Clingingsmith
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David Clingingsmith: Case Western Reserve University

No f5h4w, SocArXiv from Center for Open Science

Abstract: Neoclassical theory holds that different sources of income are fungible at the margin. In contrast, mental accounting holds that appropriate uses for income vary by source, making them infungible. This study investigates which theory better describes giving at the margin when income may have multiple sources. Dictators accrue differing amounts of (1) earned income from a real-effort task, (2) windfall income, or (3) both. I find that dictators treat marginal earned and windfall income as partially infungible, supporting mental accounting. Dictators who had a single income source gave 14% of a marginal windfall token and 5% of a marginal earned token. Strikingly, dictators who had income from both sources were sharply less generous with each, giving only 2% and 1%, respectively. Multiple accounts enabled greater selfishness at the margin. A follow-up experiment shows that two accounts must be qualitatively different, not just multiple in number, to produce this effect.

Date: 2017-12-13
New Economics Papers: this item is included in nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:f5h4w

DOI: 10.31219/osf.io/f5h4w

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