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Title:Fungibility, labels, and consumption PDF Logo
Authors:Abeler, Johannes
Marklein, Felix
Issue Date:2008
Series/Report no.:IZA Discussion Papers 3500
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.
Subjects:Fungibility
In-kind benefits
mental accounting
inframarginal consumers
field experiment
laboratory experiment
JEL:C91
Persistent Identifier of the first edition:urn:nbn:de:101:1-20080527206
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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