A 21-Country Study of How People Value Money Paid Its 5,589 Participants Nothing

A $5 saving should be worth the same whether it comes off a cheap item or an expensive one. In practice, people tend to treat it differently. A large new study in the Journal of Consumer Research tested seven classic examples of this habit on 5,589 people in 21 countries and found that all seven still hold up when the results are combined.¹

The habit is called mental accounting. It means people sort money into separate mental categories based on where it came from and what it is for, even though a dollar is a dollar. Cambridge Judge Business School, which highlighted the study, describes these categories as “invisible mental folders.”²

This matters beyond psychology departments. Richard Thaler pioneered the original research and used it as a building block of nudge theory, which is the idea of designing choices so that people drift toward better decisions.² The authors note that Thaler won the 2017 Nobel Prize in economics, and they count 712 papers on mental accounting.¹

How the test worked

The project was led from the University of Padova in Italy, where Enrico Rubaltelli supervised it. More than 100 authors took part, and Priolo, Stablum and Vacondio share first authorship.¹ Cambridge says behavioral scientist Kai Ruggeri, whom the paper lists as a Columbia professor, was a key contributor.¹²

The study was pre-registered, meaning the plan was published before the data came in. Researchers recruited people online through social media between September and October 2022. The countries ranged from Austria and Brazil to Egypt, India, Indonesia, Vietnam and the US. Prices and currencies were adjusted for each country. Participants were not paid, which is worth noting in a study about how people value money.¹

The authors call it the first large-scale test of whether these effects replicate, meaning whether they show up again, and whether they apply across countries.¹

What the study found

• Where you buy changes what you’ll pay. People accepted paying more for the same drink at a fancy resort than at a run-down grocery store. The drink is identical. Willingness to pay is not.¹
• A saving feels bigger on a cheap item. People were more willing to make a 20-minute trip to save $5 on a $15 speaker than on a $125 speaker. It is the same $5 and the same 20 minutes.¹
• How money is lost matters. People responded differently to losing a ticket than to losing cash. Other scenarios covered gym fees paid per session versus yearly, and a bought versus free upgrade coupon.¹

When the researchers pooled the data from all countries, every one of the seven scenarios replicated. When they looked at each country separately, 133 of 147 effects did, or 90.5%. The weakest were the lost-ticket scenario at 71% and the speaker saving at 81%.¹

The fine print

The effects were real, but they were smaller than in the original studies. They were also weaker in lower-income countries than in higher-income ones.¹ The authors call that link to national income exploratory. They say it leveled off around $50,000 in GDP per person, and they do not claim that income causes the difference. Financial literacy, age, education and income did not explain why countries varied.¹

The samples were convenience samples, so they were not equally representative of each country. Eleven of the 32 countries originally recruited were dropped for leaving the project or not reaching the minimum number of participants.¹ A person who showed one quirk was not much more likely to show another, and the authors caution that benefits for individuals may be overstated.¹

The study did not test budgeting or saving advice. The paper notes that mental accounting can be a bias, and that it can also help with self-control.¹

What could come next

The authors say the results support policies built on mental accounting. Examples include banking apps that help people understand their saving and spending, and nudges to help manage debt. They add that any real-world program should be tested locally first.¹