Money, Money, Money! Not the Same By Another Name ... Shape ... Or Form!

ABSTRACT - The thesis of this paper is that people’s valuation of money is subjective and contingent. To understand how people value, and spend money, it is important to examine the subjective value of money along with its actual economic value. Subjective monetary value is modeled as an anchoring and adjustment process where people anchor on the face value or denomination of an instrument and adjust by its intrinsic features (e.g., units of denomination and physical form such as coins, paper notes, gift certificates). In some instances, adjustment to the starting denomination anchor is inappropriate but performed due to preexisting schemas of value (e.g., form effects); in others, adjustment is required (e.g., foreign currency units need to be adjusted), but is inadequately performed. Using four experimental studies, we examine propositions relating to (i) anchoring on denomination (Studies 1 and 2); (ii) inappropriately adjusting for form (Studies 1 and 3); and (iii) inadequately adjusting for units (Study 4). The results show that subjective value of money systematically deviates from actual value. The primary theoretical implication of this research is that money is subjectively valued contingent on its intrinsic denomination, physical form, and unit of denomination. Managerial, public policy, and consumer welfare implications of the findings are discussed.

Citation:

Priya Raghubir and Joydeep Srivastava (2001) ,"Money, Money, Money! Not the Same By Another Name ... Shape ... Or Form!", in NA - Advances in Consumer Research Volume 28, eds. Mary C. Gilly and Joan Meyers-Levy, Valdosta, GA : Association for Consumer Research, Pages: 14.

Advances in Consumer Research Volume 28, 2001     Page 14

MONEY, MONEY, MONEY! NOT THE SAME BY ANOTHER NAME ... SHAPE ... OR FORM!

Priya Raghubir, University of California, Berkeley

Joydeep Srivastava, University of California, Berkeley

[The authors thank Jacob Cohen and the staff at Jimmy Bean=s Cafe for their cooperation and assistance with Studies 1 and 2 and Ana Valenzuela for running the experiments. This research was partially funded by the Hellman Family grant awarded by the University of California, Berkeley to the first author. The authors, listed in alphabetical order, contributed equally to this article.]

ABSTRACT -

The thesis of this paper is that people’s valuation of money is subjective and contingent. To understand how people value, and spend money, it is important to examine the subjective value of money along with its actual economic value. Subjective monetary value is modeled as an anchoring and adjustment process where people anchor on the face value or denomination of an instrument and adjust by its intrinsic features (e.g., units of denomination and physical form such as coins, paper notes, gift certificates). In some instances, adjustment to the starting denomination anchor is inappropriate but performed due to preexisting schemas of value (e.g., form effects); in others, adjustment is required (e.g., foreign currency units need to be adjusted), but is inadequately performed. Using four experimental studies, we examine propositions relating to (i) anchoring on denomination (Studies 1 and 2); (ii) inappropriately adjusting for form (Studies 1 and 3); and (iii) inadequately adjusting for units (Study 4). The results show that subjective value of money systematically deviates from actual value. The primary theoretical implication of this research is that money is subjectively valued contingent on its intrinsic denomination, physical form, and unit of denomination. Managerial, public policy, and consumer welfare implications of the findings are discussed.

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