Does the ‘denomination effect’ explain our spending patterns?

NPR reports:

economists have researched the phenomenon, which they call the Denomination Effect. Priya Raghubir and Joydeep Srivastava did a series of experiments in the U.S. and China that showed people were much more willing to spend the same sum of money if they had smaller denominations instead of one large bill.
“We’ve done some studies with four quarters and a dollar, and we found that people were much less likely to spend the $1 note that they were given than the four quarters they were given,” Raghubir says.

(…) Economists have researched… the Denomination Effect. Priya Raghubir and Joydeep Srivastava did a series of experiments in the U.S. and China that showed people were much more willing to spend the same sum of money if they had smaller denominations instead of one large bill.

“We’ve done some studies with four quarters and a dollar, and we found that people were much less likely to spend the $1 note that they were given than the four quarters they were given,” Raghubir says.

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