Denomination effect

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The denomination effect is a theoretical form of cognitive bias relating to currency, whereby people are less likely to spend larger bills than their equivalent value in smaller bills. It was proposed by Priya Raghubir and Joydeep Srivastava in their 2009 paper "Denomination Effect".[1][2]

In an experiment conducted by Raghubir and Srivastava, university students were given a dollar, either in quarters or as a single dollar bill. The students were then given the option to either save the money they had been given or to spend it on candy. Consistent with the theory, the students given the quarters were more likely to spend the money they were given.[3]

Notes[edit]

  1. ^ Priya Raghubir and Joydeep Srivastava, "Denomination Effect", Journal of Consumer Research, 7 April 2009, http://www.journals.uchicago.edu/doi/abs/10.1086/599222
  2. ^ Joffe-Walt, Chana a(12 May 2009). Why We Spend Coins Faster Than Bills, NPR
  3. ^ Priya Raghubir, Joydeep Srivastava. "Denomination Effect". Retrieved 5 December 2012.