Mental Accounts and the Marginal Propensity to Give | Weatherhead School at Case Western Reserve University

Mental Accounts and the Marginal Propensity to Give

Mental Accounts and the Marginal Propensity to Give



Journal of Economic Science Association, vol. 5, pp. 170-181, December 2019




This study uses a framed field experiment to investigate whether the neoclassical model or<br>mental accounting better describes how income from different sources are treated in sharing<br>decisions. Participants play a dictator game after earning income in real-effort task and/or receiving<br>a windfall. I find that dictators treat marginal earned and windfall income as partially infungible, which supports mental accounting. Two-step estimates show that sharers shared<br>15% of a marginal windfall token and 7% of a marginal earned token. Strikingly, sharers who had income from both sources were sharply less generous with both earned and windfall income than those who had only a single source. This is consistent with other instances of<br>complex decision frames inducing selfish behavior by providing a cover of ambiguity. This aspect of mental accounts has thus far received little attention. A follow-up experiment shows that two accounts must qualitatively different, not just multiple in number, to induce more selfishness.