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Mental accounts and the marginal propensity to give

Published online by Cambridge University Press:  01 January 2025

David Clingingsmith Open the ORCID record for David Clingingsmith [Opens in a new window]
David Clingingsmith*
Affiliation:
Department of Economics, Case Western Reserve University, Cleveland, USA
*
e-mail: [email protected]
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Abstract

Neoclassical theory holds that different sources of income are fungible at the margin. In contrast, mental accounting holds that appropriate uses for income vary by source, making them infungible. This study investigates which theory better describes giving at the margin when income may have multiple sources. Dictators accrue differing amounts of (1) earned income from a real-effort task, (2) windfall income, or (3) both. I find that dictators treat marginal earned and windfall income as partially infungible, supporting mental accounting. Dictators who had a single income source gave 14% of a marginal windfall token and 5% of a marginal earned token. Strikingly, dictators who had income from both sources were sharply less generous with each, giving only 2% and 1%, respectively. Multiple accounts enabled greater selfishness at the margin. A follow-up experiment shows that two accounts must be qualitatively different, not just multiple in number, to produce this effect.

Keywords

Mental accountsSocial preferencesMarginal income

JEL classification

D63: Equity, Justice, Inequality, and Other Normative Criteria and Measurement D64: Altruism • Philanthropy • Intergenerational Transfers D83: Search • Learning • Information and Knowledge • Communication • Belief • Unawareness
Type
Original Paper
Information
Journal of the Economic Science Association , Volume 5 , Issue 2 , December 2019 , pp. 170 - 181
Copyright
Copyright © Economic Science Association 2019

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Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s40881-019-00072-2) contains supplementary material, which is available to authorized users.

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