Fungibility, Labels, and Consumption

Johannes Abeler and Felix Marklein
Additional contact information
Felix Marklein: Federal Ministry of Finance

No 3500, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Fungibility of money is a central principle in economics. It implies that any unit of money is substitutable for another and that the composition of income 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 suggestion of the label. A controlled laboratory experiment confirms this result and further shows that subjects with lower mathematical abilities are more likely to violate fungibility. The findings lend support to behavioral models such as narrow bracketing or mental accounting. One implication of our results is that in-kind benefits distort consumption more than usually assumed.

Keywords: field experiment; inframarginal consumers; mental accounting; In-kind benefits; fungibility; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 C93 D01 H31 I38 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2008-05
New Economics Papers: this item is included in nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published - substantially revised version published in: Journal of the European Economic Association, 2017, 15 (1), 99-127

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Related works:
Journal Article: Fungibility, Labels, and Consumption (2017)
Working Paper: Fungibility, Labels and Consumption (2010)
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