Photo by zzzack.
How? Money is money right? Mathematically a hundred bucks is a hundred bucks, whether it's in pennies or a single bill. Psychologically is a whole different story:
According to a new study to be published in the Journal of Consumer Research, shoppers are less likely to spend their dough if they are carrying cash in large denominations. This so-called "denomination effect" can be a powerful predictor of consumer spending habits. Through a series of experiments, the study shows that if people have an equivalent amount of money, say $100, the folks with a Ben Franklin in their pockets might not part with it, while those carrying Andrew Jacksons and George Washingtons more easily give up that cash.
The researchers found several motivations behind consumer behavior. First consumers tended to overvalue higher denomination money. Even though five $20 bills is the same as one $100 when it comes time to pay for things, people treat the $100 as though it's more valuable and needs to be conserved. Another aspect might as well be called the Pringles Rule of Economics: consumers didn't like breaking large bills because breaking them often lead to spending the change more easily. It was easier to resist taking out a single large bill and breaking it for a purchase than it was to pull out smaller bills. What about you? Would breaking a large bill be enough to make you rethink a purchase?
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