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Fungibility, Labels, and Consumption

Johannes Abeler,Felix Marklein

Published 2008 in Social Science Research Network

ABSTRACT

Fungibility, Labels, and Consumption 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. JEL Classification: C91, C93, D01, H31, I38

PUBLICATION RECORD

  • Publication year

    2008

  • Venue

    Social Science Research Network

  • Publication date

    Unknown publication date

  • Fields of study

    Not labeled

  • Identifiers
    DOI 10.1093/jeea/jvw007
  • External record

    Open on Semantic Scholar

  • Source metadata

    Semantic Scholar

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