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Mental accounts and the marginal propensity to give

  • David ClingingsmithEmail author
Original Paper
  • 27 Downloads

Abstract

Neoclassical theory holds that different sources of income are fungible at the margin. In contrast, mental accounting holds that appropriate uses for income vary by source, making them infungible. This study investigates which theory better describes giving at the margin when income may have multiple sources. Dictators accrue differing amounts of (1) earned income from a real-effort task, (2) windfall income, or (3) both. I find that dictators treat marginal earned and windfall income as partially infungible, supporting mental accounting. Dictators who had a single income source gave 14% of a marginal windfall token and 5% of a marginal earned token. Strikingly, dictators who had income from both sources were sharply less generous with each, giving only 2% and 1%, respectively. Multiple accounts enabled greater selfishness at the margin. A follow-up experiment shows that two accounts must be qualitatively different, not just multiple in number, to produce this effect.

Keywords

Mental accounts Social preferences Marginal income 

JEL Classification

D64 D63 D83 

Notes

Acknowledgements

Thanks for helpful comments and suggestions to John List, Dirk Engelmann, Robin Dubin, Silke Forbes, Sue Helper, David Huffman, Roman Sheremeta, Matt Sobel, Justin Sydnor, Mark Votruba, and seminar audiences at IUPUI, the 2013 ESA World Meetings, the 2013 Science of Philanthropy Initiative Conference, and The Ohio State University. I also thank Robert Slonim and two anonymous referees for this journal for their guidance in revising the paper. Trevor Allen and Anthony Gatti provided excellent research assistance.

Supplementary material

40881_2019_72_MOESM1_ESM.docx (847 kb)
Supplementary material 1 (DOCX 846 kb)

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Copyright information

© Economic Science Association 2019

Authors and Affiliations

  1. 1.Department of EconomicsCase Western Reserve UniversityClevelandUSA

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