Center for Behavioral Decision Research

CBDR : Seminar Series : Seminar by Johannes Abeler

Fungibility, Labels, and Consumption

	presented by Johannes Abeler (University of Bonn)


	Tuesday, January 29	link to paper
	Noon-1:15
	Porter 223D	link to Speaker's Site

	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.

	Host at CMU: Weber