Other People’s Money: Money’s Perceived Purchasing Power Is Smaller for Others Than for the Self

Evan Polman, Daniel A Effron, Meredith R Thomas, Vicki MorwitzEditor and Pankaj AggarwalAssociate Editor

Journal of Consumer Research, 2018, vol. 45, issue 1, 109-125

Abstract: Nine studies find that people believe their money has greater purchasing power than the same quantity of others’ money. Using a variety of products from socks to clocks to chocolates, we found that participants thought the same amount of money could buy more when it belonged to themselves versus others—a pattern that extended to undesirable products. Participants also believed their money—in the form of donations, taxes, fines, and fees—would help charities and governments more than others’ money. We tested six mechanisms based on psychological distance, the endowment effect, wishful thinking, better-than-average biases, pain of payment, and beliefs about product preferences. Only a psychological distance mechanism received support. Specifically, we found that the perceived purchasing power of other people’s money decreased logarithmically as others’ psychological distance from the self increased, consistent with psychological distance’s subadditive property. Further supporting a psychological distance mechanism, we found that framing one’s own money as distant (vs. near) reduced the self-other difference in perceived purchasing power. Our results suggest that beliefs about the value of money depend on who owns it, and we discuss implications for marketing, management, psychology, and economics.

Keywords: money; self-other differences; psychological distance; social distance; subjective value; endowment effect (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:jconrs:v:45:y:2018:i:1:p:109-125.

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Journal of Consumer Research is currently edited by Bernd Schmitt, June Cotte, Markus Giesler, Andrew Stephen and Stacy Wood

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