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Title:Fungibility, labels and consumption PDF Logo
Authors:Abeler, Johannes
Marklein, Felix
Issue Date:2010
Series/Report no.:CeDEx discussion paper series 2010-13
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 results is that in-kind benefits distort consumption more strongly than usually assumed.
Subjects:fungibility
in-kind benefits
mental accounting
narrow bracketing
field experiment
laboratory experiment
JEL:C91
C93
D01
H31
I38
Document Type:Working Paper
Appears in Collections:CeDEx Discussion Paper Series, The University of Nottingham

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