Monday, June 11, 2007

Is that you ?

Anyone who has ever thrown around a stack of liras or rupees knows that people are sometimes more extravagant with currencies that have high face values. A paper recently published in The Journal of Consumer Research explored that effect.

“You feel more rich if you have more units of currency,” said Dilip Soman, a professor of marketing at the University of Toronto, and one of the paper’s authors.

In one study, students in Hong Kong, when asked to allocate spending from an imaginary paycheck of 9,000 Hong Kong dollars, devoted an average of 532.35 of those dollars to food spending.

Two weeks later, the students were asked to imagine that they had moved to the fictional country of Tristania, where a Hong Kong dollar equaled 18 Tristanian dollars, and therefore their pay was 162,000 Tristanian dollars. The students splurged, spending 30 percent more on food in real terms.

Full report here. (NYT free sub).

I somehow felt it’s too fickle a finding. Wouldn’t people be intuitive enough to reduce whatever they buy in terms of a base currency and figure out its worth ?

Well, may be I am missing something out here.

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