The denomination effect (Raghubir and Srivastava 2009) suggests that individuals are less likely to spend a specific amount of money when it is represented by a single large denomination (e.g., a $10 bill) relative to many smaller denominations (e.g., ten $1 bills). This research explores the idea that consumers are reluctant to break large bills because smaller denominations are less easy to monitor and keep track of relative to larger denominations. This increases the likelihood of spending with smaller denominations. A series of four studies suggest that in estimating the contents of one's wallet, money is more difficult to recall, and recalled less accurately the smaller the denomination, and more the number of units of any denomination. Study 1 demonstrates the biases in recall in a simple memory-based task, study 2 adds a stimulus-based task, study 3 explores the effect of motivation to be accurate and task difficulty, and study 4 links the biases in recall to actual spending. We develop a descriptive psychophysical model of how individuals estimate the money they are carrying and fit the model using the data from the four studies. Together, the findings provide evidence for a numerosity bias, where a larger number of units of a denomination are less accurately recalled compared to a fewer number of units; and a denomination bias, where smaller denominations are recalled less accurately as compared to larger denominations.
Anticipated verbal feedback in a dictator game has been shown to induce altruistic behavior. However, in the ultimatum game which, apart from generosity, entails a strategic component since a proposer may (rightly) fear that the responder will reject a low offer, it remains an open question whether anticipated verbal communication can be effective in increasing offers. We implement a between-subjects experimental design in the ultimatum game with strategy method manipulating the form of anticipated verbal communication (no communication, one-sided communication from proposers and two-sided communication) and find that offers are significantly higher in the presence of anticipated two-sided communication. However, anticipated one-sided communication from proposers has no effect on offers, suggesting, as found in previous studies, that it is the anticipation of feedback that is relevant.
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