Operations, Information and Decisions Papers

Document Type

Journal Article

Date of this Version

8-2009

Publication Source

Journal of Economic Behavior & Organization

Volume

71

Issue

2

Start Page

384

Last Page

394

DOI

10.1016/j.jebo.2009.04.007

Abstract

We study the effect of small windfalls on consumer spending decisions by comparing the purchases online grocery customers make when redeeming $10-off coupons with the purchases they make without coupons. Controlling for customer fixed effects and other variables, we find that grocery spending increases by $1.59 when a $10-off coupon is redeemed. The extra spending associated with coupon redemption is focused on groceries that a customer does not typically buy. These results are consistent with the theory of mental accounting but are not consistent with the standard permanent income or lifecycle theory of consumption. While the hypotheses we test are motivated by mental accounting, we also discuss some alternative psychological explanations for our findings.

Copyright/Permission Statement

© . This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

Mental accounting, windfalls, marginal propensity to consume, coupons

Share

COinS
 

Date Posted: 27 November 2017

This document has been peer reviewed.