Abstract

http://ssrn.com/abstract=2114874
 
 

Citations (3)



 


 



Mental Accounting and Consumer Choice: Evidence from Commodity Price Shocks


Justine S. Hastings


Brown University; National Bureau of Economic Research (NBER)

Jesse M. Shapiro


University of Chicago; National Bureau of Economic Research (NBER)

July 2012

NBER Working Paper No. w18248

Abstract:     
We formulate a test of the fungibility of money based on parallel shifts in the prices of different quality grades of a commodity. We embed the test in a discrete-choice model of product quality choice and estimate the model using panel microdata on gasoline purchases. We find that when gasoline prices rise consumers substitute to lower octane gasoline, to an extent that cannot be explained by income effects. Across a wide range of specifications, we consistently reject the null hypothesis that households treat “gas money” as fungible with other income. We evaluate the quantitative performance of a set of psychological models of decision-making in explaining the patterns we observe. We also use our findings to shed light on extant stylized facts about the time-series properties of retail markups in gasoline markets.

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Number of Pages in PDF File: 50

working papers series


Date posted: July 21, 2012  

Suggested Citation

Hastings, Justine S. and Shapiro, Jesse M., Mental Accounting and Consumer Choice: Evidence from Commodity Price Shocks (July 2012). NBER Working Paper No. w18248. Available at SSRN: http://ssrn.com/abstract=2114874

Contact Information

Justine Hastings (Contact Author)
Brown University ( email )
Box 1860
Providence, RI 02912
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jesse M. Shapiro
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2688 (Phone)
773-834-8172 (Fax)
HOME PAGE: http://home.uchicago.edu/~jmshapir/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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