THE SPENDING PSYCHOLOGY OF COIN AND PAPER MONEY DENOMINATIONS

Recent research by psychologists have shows that the different denominations you have on hand affects how you spend them. Humans spend small denomination bills more freely than large denominations. Casinos give out rolls of quarters when cashing in their free chits or travel coupons.

Stands to reason. But I never gave any thought that different denominations of money have different psychological values. It even extends down as well as up. "Don't give me pennies in change" is a psychological reason for the penny dish next to the cash register with the sign "Take a penny, leave a penny."

Perhaps it is also a strong reason why the cent should be eliminated from circulation and all cash transactions should be rounded off to the nearest convenient coin denomination. Cents should be abolished and the U.S. Mint should cease their money-losing minting.

A paper in the December, 2009 issue of the Journal of Consumer Research by Priya Raghubir and Joydeep Srivastava looks at this issue. In a number of studies (many of them looking at real purchases), they found that when people had money in larger bills, they were less likely to spend money than when they had small denomination bills or coins. Of interest, though, once people decided to spend money, they tended to spend more money when making purchases with the larger bills than with the smaller ones. The authors of this study interpret the results as arguing that large bills are treated as less flexible than smaller ones, and that is why people are reluctant to spend them.

Art Markman, a PhD and writer in the psychological field, had a somewhat different take. "I'd like to give a different interpretation of this work, though, based on some research I did with Miguel Brendl and Tory Higgins," he wrote.

"The form of money that you have tends to remind you of particular kinds of purchases. If you are carrying $1 bills with you, those bills are most typically used for small purchases like buying candy or a cup of coffee. Larger bills are more associated with larger purchases."

There is more in his article in Psychology Today. But I would like to suggest author Markman study the difference in spending psychology of a paper dollar versus a dollar coin. Which would you spend more freely and why?

Check out his article for more detail: How are spending habits affected by the type of money in your pocket? (http://www.psychologytoday.com/blog/ulterior-motives/201001/how-are-spending-habits-affected-the-type-money-in-your-pocket)

To read the complete article, see: Food Stamp Materials Bound for Smithsonian (www.nytimes.com/2010/01/22/arts/design/22stamps.html)

To read the original USDA press release, see: Smithsonian Acquires Historic Food Coupons from USDA (www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?
contentidonly=true&contentid=2010/01/0028.xml)

Wayne Homren, Editor

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