The Effects of Monetary Magnitude and Level of Aggregation on the Temporal Framing of Price

Abstract

Existing research has shown that the “pennies-a-day” strategy of reframing a large aggregate expense as a small daily expense helps to reduce the perceived cost of a transaction (Nagle and Holden, 1995; Price, 1995; Gourville, 1998, 1999). This paper builds on this research and explores the robustness of the phenomenon across two dimensions – (1) the level of temporal aggregation and (2) the dollar magnitude of the transaction. First, we show that the effectiveness of a pennies-a-day strategy is not limited to per-day framing. Rather, we find a more general phenomenon in which a “less aggregate” expense is preferred to a “more aggregate” expense, such that if a per-day framing is preferred to a per-year framing, than a per-month framing also will be preferred to a per-year framing. Second, we show that this effectiveness reverses with the magnitude of the underlying expense, such that while a framing of “$1 per day” is preferred to one of “$365 per year,” a framing of “$4200 per year” is preferred to one of “$11.50 per day.”