List1.
The
Value
of
Money.
Full Text Available
Academic Journal
By: Spiller, Stephen A.
Advances
in
Consumer
Research.
2011, Vol. 39, p267-270. 4p.
Subjects: Consumer
research; Labor incentives;
Money;
Consumer
behavior
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The Value of Money Session Chair: Stephen A. Spiller, UCLA, USA
Paper #1: “I’ll Have One of Each”: How Separating Rewards into (Meaningless) Categories Increases Motivation Scott Wiltermuth, University of Southern California, USA Francesca Gino, Harvard Business School, USA Paper #2: Irrelevant Outside Options Influence the Value of Money Stephen Spiller, UCLA, USA Dan Ariely, Duke University, USA Paper #3: Money Makes Money More Important Sanford DeVoe, University of Toronto, Canada Jeffrey Pfeffer, Stanford University, USA Byron Lee, University of Toronto, Canada Paper #4: Nostalgia Weakens the Desire for Money Jannine Lasaleta, University of Minnesota, USA Kathleen Vohs, University of Minnesota, USA Constantine Sedikides, University of Southampton, UK SESSION OVERVIEW Money is a remarkable technology fulfilling three primary functions: a medium of exchange, a unit of account, and a store of value. It is an integral part of most consumer interactions and pervades every aspect of our consumer lives. Other media of exchange, such as gift cards and reward points, fulfill similar functions and are nearly as ubiquitous. The value we place on money determines the extent to which we strive to accumulate it and our reluctance to part with it when making purchases. Normatively, money’s value is determined by the utility gained by using the marginal dollar. In this session, we consider a variety of important non-normative influences on the perceived value of money and media of exchange. In doing so, we help to answer how money is psychologically imbued with value. First, Wiltermuth and Gino show that organizing incentives such as time and money into categories increases motivation to work for those incentives. Such categories may be arbitrary, and the effect is robust to gain and loss frames; merely separating them into categories increases their value. Second, Spiller and Ariely examine how the set of possible purchases influences the value of a resource. Normatively, only the best use of a resource should affect its value. Instead, other possible but irrelevant uses affect the value placed on a resource as well. Third, DeVoe, Pfeffer, and Lee find that the accumulation of money increases the importance individuals place on money. By earning money through labor, the symbolic value of money is associated with one’s self-esteem and sense of competence, thereby increasing its importance. Finally, Vohs, Lasaleta, and Sedikides show that feelings of nostalgia weaken the desire for money. Nostalgia provides a sense of social support, weakening the reliance on money to provide such support in its place, and thus decreasing its value. Each paper advances our understanding of a truly fundamental question in consumer behavior: how do consumers value money and other media of exchange? Overall, the session provides a coherent set of distinct drivers of money’s perceived value with a wide variety of implications for marketing and consumer behavior. These papers will likely appeal to researchers interested in a variety of fields including gift cards, incentives, labor, materialism, the social and cognitive roles of money, and retro brand appeals.
“I’ll Have One of Each”: How Separating Rewards into (Meaningless) Categories Increases Motivation ExTENDED ABSTRACT Researchers have long sought to understand how to foster motivation more effectively. Much of this research has highlighted rational mechanisms that increase or make salient the benefits the worker obtains by applying effort. For instance, Adam Grant’s (2007, 2008) work has shown that highlighting the pro-social impact of people’s work increases their motivation. Hackman and Oldham (1976) have similarly shown that task identity, task significance, and positive feedback all influence motivation. In the present research, we propose that even factors that should not rationally affect motivation may do so. Specifically, we hypothesize that categorizing rewards can increase motivation, even when those categories are arbitrary. We put forth this hypothesis because we believe people clump rewards into categories and are more sensitive to increases in the number of categories of rewards than they are to increasing the magnitude of rewards within a category. Thus, our work draws inspiration from Thaler’s (1999) work on mental accounting. We tested our hypothesis across three experiments. In Study 1, 157 undergraduate students (53% female; Mage = 21.0) at a large, private university on the West Coast first completed an anagram unscrambling task (Cameron and Miller, 2010). Unbeknownst to the participants, the third and ninth anagrams were nearly impossible to solve. In one condition, successfully unscrambling anagrams ostensibly earned participants $2 per anagram solved. In another condition, successfully unscrambling anagrams allowed them to skip four minutes of a boring task. In a third condition, successfully unscrambling anagrams earned participants $1 and allowed them to skip two minutes of the boring task. Thus, these participants earned half the money and saved half the time that did participants in each of the other two conditions. The dependent variable was the amount of time participants persisted in the task. As predicted, participants in the two categories of benefit condition persisted longer (M = 9.1 minutes, SD = 3.1) than did those in the monetary benefit (M = 7.0, SD = 2.6) or time benefit conditions (M = 6.9, SD = 3.7), ps <> Across these studies, we instructed participants that they would be transcribing a number of sections of type-written text to help us to prepare for a future study, in which we would study how handwriting can affect the perceptions people have of others. We manipulated whether a collection of items purchased from a local dollar store were portrayed as belonging to a single category or to two categories. In the categorization condition, participants were told that Category 1 was in the Purple Storage Container and Category 2 was in the Clear Storage Container. These participants were told that they could take home one of the items from either category if they transcribed for ten minutes and that they could take home an item from the other category if they transcribed for twenty minutes. In the no-categorization condition, participants were told that they could take home one item if they transcribed for ten minutes and two items if they transcribed for twenty minutes. Participants were told that may spend as much time or as little time transcribing these sections as they liked. Participants were then told to take a look at the rewards that they could win. The rewards were not sorted into specific categories; rather, there was a mix of statio
268 / The Value of Money nery, hardware, and food items in each container. The likelihood of participants transcribing sections of text for a full twenty minutes served as the primary dependent variable. Study 2 participants in the categorization condition were more likely to transcribe for the full twenty minutes (34.4%) than were participants in the no-categorization condition (9.7%), p = .03. They also reported that they were more motivated to obtain the second reward (M = 4.22, SD = 2.21) than did participants in the no-categorization condition (M = 3.07, SD = 1.95), p = .03. Bootstrapping analysis revealed a significant indirect effect. Study 3 replicated the categorization effect using a loss frame. In this case, participants selected their prizes at the beginning and were asked to return one if they did not work twenty minutes and return two if they did not work for ten minutes. Motivation to obtain the second item again mediated the effect. We conclude from our results that that separating incentives into categories can increase motivation, even when the basis for the categorization is meaningless. Irrelevant Outside Options Influence the Value of Money ExTENDED ABSTRACT How do consumers represent the value of money? We propose that holding constant the value of a resource’s best use, liking for the category of possible and accessible uses is an important (but normatively irrelevant) determinant of the perceived value of money. Economically, money is as valuable as the goods it buys. Understanding other non-normative influences on the value of money informs our understanding of consumers’ propensities to spend, save, and earn money. Because money is associated with a large, heterogeneous group of products, the associations between money and its best uses are weak (Weber and Johnson 2006). As a result, other inputs associated with a resource that are not its best uses, and that are therefore irrelevant, may be likely to affect its perceived value as well. In four studies, we demonstrate that accessible but irrelevant items in the category of possible purchases affect how consumers value media of exchange. In Studies 1 and 2 we examine the perceived value of artificial media of exchange, and in Studies 3 and 4 we examine the perceived value of gift cards. Measured set composition. In Study 1, we ask: Do resource uses other than the most valuable use affect the value of the resource? Undergraduate students (total N=42; usable N=34) learned how each of several certificates could be used to purchase one product from associated subsets of 1, 2, or 3 products. For example, one certificate could be exchanged for one product from the set: notepad, packet of pens, roll of tape. Each certificate should be worth as much as its most valuable use. Participants reported how much they would be willing to pay for each certificate and then reported how much they would be willing to pay for each product. Regressing certificate willingness to pay (WTP) on (a) set size, (b) maximum product WTP across its subset of products, (c) average product WTP across its subset of products, and (d) certificate fixed effects revealed that participants were willing to pay more for certificates associated with larger sets (p<.0001),><.09),><.05).>
for maximum WTP and set size, manipulating a set of products to replace a high-valued product with a low-valued product decreases WTP (p<.0001).><.05;><.0001).> 6.12 vs. 4.66, p <>
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Money Makes Money More Important ExTENDED ABSTRACT The strange part is, the more I made, the more I got preoccupied with money. When suddenly I didn’t have to think about money as much, I found myself starting to think increasingly about it. Money corrupts the mind. –Daniel Vasella, CEO of Novartis Although individual differences are undoubtedly important in affecting inter-individual variations in the importance people place on money, the importance of money may also be endogenously affected by how and how much money people receive. To the extent that there is variability in money’s importance, the standard prediction is that more money should make money less important, following the principle of diminishing marginal utility. However, we argue that more money can cause people to place greater importance on money when it is earned from labor, because the symbolic value of money implicates one’s self-esteem and is a signal of competence. We initially tested this hypothesis by contrasting two different forms of income (labor income per hours worked versus investment income) using a nationally representative longitudinal survey that permitted us to see how changes in income affected changes in the importance people place on money. At two time periods five years apart, respondents rated the subjective importance of money (i.e., How important is having a lot of money?) on a 1 (not at all important) to 10 (extremely important) scale. We ran a first-differenced regression that removed constant individual differences and included measures of changes in the number of hours worked per week, changes in the number of household children, changes in total outstanding loans on all the property respondents owned, and changes in the total number of discretionary possessions. Consistent with the hypothesis that money that is earned from labor provides symbolic information about self-esteem and competence, changes in the amount of labor income earned per hour were positively associated with changes in the importance of money, β = .04, t(3067) = 2.39, p = .017. However, changes in investment income were negatively associated with changes in the importance of money, β = -.04, t(3067) = 2.10, p = .036. Next, we used experiments to further explore the causal association between how and how much money is received and the subsequent importance placed on money. We wanted to see if we could experimentally manipulate “income” on a small scale and obtain similar causal effects on the importance of money by developing an experimental treatment which would clearly distinguish “earned” income with its implications for the self from income that had no relevance to people’s feelings of self-esteem or competence. Towards this end, we utilized a laboratory setting where participants could be randomly assigned to experimental treatments. Specifically, some participants received unexpected additional money as part of the experiment. In a condition analogous to labor income, participants were told that they had received this unanticipated money as a consequence of their work performance—information that should directly cause them to view the money as being associated with self-esteem and competence. If the critical factor is whether or not money reflects the performance of an individual and his or her work, we thought that if people received money because of random chance, that money would not have the same implications for the self and would, therefore, not engender additional symbolic value in terms of money’s importance (or at least not to the same extent). We examined participants post-manipulation ratings on the value importance of money subscale (Mitchell and Mickel 1999) that has been used
in prior research. Specifically, participants rated their agreement to four statements (“I value money very highly”, “Money is important”, “I daydream about being rich”, and “I believe the more money you have, the happier you are”) on a 1(strongly disagree) to 7(strongly agree) scale. Participants who received $10 randomly did not differ in the importance of money (M = 5.07, SD = 1.32) from their counterparts who had received $1 randomly (M = 5.17, SD = 1.16), F(1, 28) = .83, ns. However, participants who received $10 because of the performance of their labor did rate the value importance of money as significantly higher (M = 5.50, SD = .84) than participants who received $1 (M = 4.71, SD = .88), F(1, 37) = 8.20, p = .007. In a follow-up experiment, we replicated the findings of this previous study on the importance of money subscale using a different experimental task with a similar amount by source of money interaction, F(1, 89) = 4.92, p = .029. Additionally, we found that the amount by source interaction was mediated by the more proximal construct of participant’s perceived competency (z = 1.81, p = .07) than by the more global construct of self-esteem (z = .48, p = .63). By demonstrating that the amount as well as the source of income is a critical variable in how important money is to individuals, the present findings extend and elaborate on a decision making literature that attests to the fact that people do not experience all dollars as the same. Additionally, the fact that the acquisition of money from people’s labor caused people to value money more supports theoretical perspectives emphasizing the symbolic value of money as distinct from instrumental or individual difference accounts explaining its importance. Money is not just a medium of exchange or a store of value, but can have drug-like properties—the more you have, the more you want. Thus, money can become even more important than its economic value alone would dictate when it is a signal of one’s competency at work. Nostalgia Weakens the Desire for Money ExTENDED ABSTRACT Nostalgia is commonplace in marketing, and nostalgic themes have been particularly pervasive during recent times of economic crisis. In 2009, PepsiCo launched nostalgic versions of their popular sodas, Pepsi-Cola and Mountain Dew. The so-called throwback beverages, based on original formulas and packaging, were meant to evoke sentiments of the 1960s and 1970s (Elliot 2009). Similarly, General Mills introduced retro packaging for their Big 5 cereals (Trix, Lucky Charms, Cheerios, Cinnamon Toast Crunch, and Honey Nut Cheerios) to induce a wistfulness of the past. Despite nostalgia’s pervasiveness in marketing, little is known about how nostalgia might affect spending in general – beyond spending for nostalgic products themselves. In this article, we test how nostalgia motivates consumption. We tested whether nostalgia’s ability to give people a sense of social support would decrease the desire of money. In this research, we bridge two literatures: one demonstrating that nostalgia increases perceptions of social support (Wildschut et al. 2006) and another suggesting that social support and money are oppositional forces (Heyman and Ariely 2004). We reasoned that, when people perceive they are backed by ample social support, they will find money less desirable than it would be otherwise. This reasoning comes from the idea that both money and social support enable people to get what they need from society, such as shelter, security, nourishment, and companionship (Fiske 1994; Heyman and Ariely 2004). Once a person has enough of either money or social support, she will feel that her needs are met and therefore will crave the other less. That is, if consumers be
270 / The Value of Money lieve that they can satisfy their wants and needs through social support, then their motivation for money will weaken. Four experiments tested whether the psychological state of nostalgia, due to its ability to foster a sense of social connectedness, would weaken the desire for money. Experiment 1 induced nostalgia using copy on print advertisements. In the nostalgia condition, participants viewed advertisements that focused on nostalgic memories from one’s past, whereas in the control condition participants viewed advertisements that focused on making new memories. Our operationalization of desire for money was the behavior of giving away money in a pooled investment game (Fehr and Gachter 2000). Participants had the opportunity to contribute their money to a common pool. We found that participants in the nostalgia condition gave up more of their money to the common pool than participants in the control condition. Experiment 2 tested desire for money using the dictator game (Guth et al. 1982). This involves a one-shot exchange, in which a participant decides unilaterally how much money (if any) to give to another player with the rest of the money remaining with the participant. First, however, we used an autobiographical narrative task to differentially elicit feelings of nostalgia. Some participants wrote about a time they felt nostalgic (defined as) “a sentimental longing for a personally experienced past.” Participants in the control condition were instructed to write about an ordinary event from their past. Then participants played the dictator game, in which they were always assigned to be the dictator. As predicted, participants in the nostalgic event condition gave significantly more money to the responder than those in the ordinary event condition. Experiment 3 measured desire for money using a perceptual task – size of coins drawn. Bruner and Goodman (1947) interpreted the fact that poor children drew larger coins than wealthier children as greater motivation to have money. Participants in the nostalgia condition wrote about a nostalgic event, whereas participants in the control condition wrote about the route they took home from high school. Then ps drew on a piece of paper the size of a 50-cent piece and $1 coin. We measured the diameter of the coins, and as predicted nostalgic participants, compared to those in the control condition, drew smaller coins. We took this to signal a weaker desire for money. Experiment 4 measured willingness to pay as the indicator of desire for money. This study returned to the advertising copy method of eliciting nostalgia (or not) in our participants. After viewing an advertisement that cued perusal childhood memories (nostalgia condition) or an advertisement that cued the idea of making new memories (control condition), they perused pictures of 24 products and were instructed to indicate their willingness to pay for each. As expected, willingness to pay among participants in the nostalgic memory condition was higher than in the control condition. The present research tested the hypothesis that nostalgia reduces the desire for money. Prior research hinted at the idea that money and social connectedness are opposing motivational forces. Our research used this insight to test whether nostalgia would lead people to behave as if they had little motivation toward money. Four
experiments supported this claim, by showing that in interpersonal and intrapersonal contexts, including spending money on products or giving it to others, people in a nostalgic mood desire money less than they would otherwise. REFERENCES Bruner, Jerome S. and Cecile C. Goodman (1947), “Value and Need as Organizing Factors in Perception”, Journal of Abnormal and Social Psychology, 42 (1), 33-44. Cameron, Jessica S., and Dale T. Miller (in press), “Unethical behavior in loss versus gain frames,” in D. De Cremer (Ed.), Psychological perspectives on ethical behavior, Charlotte, NC: Information Age. Elliot, Stewart (2009), “Warm and Fuzzy Makes a Comeback,” The New York Times, http://www.ft.com/cms/s/0/17ba137c-a17111df-9656-00144feabdc0.html. Fehr, Ernst and Simon Gächter (2000), “Fairness and Retaliation: The Economics of Reciprocity,” Journal of Economic Perspectives, 14 (Summer), 159-81. Fiske, Alan P. (1992), “The Four Elementary Forms of Sociality: Framework for a Unified Theory of Social Relations,” Psychological Review, 99 (October), 689–723. Grant, Adam M. (2007), “Relational job design and the motivation to make a prosocial difference,” Academy of Management Review, 32(2), 393 – 417. Grant, Adam M. (2008), “The significance of task significance: Job performance effects, relational mechanisms, and boundary conditions,” Journal of Applied Psychology, 93(1), 108-124. Güth, Werner, Rolf Schmittberger, and Bernd Schwarze (1982), “An Experimental Analysis of Ultimatum Bargaining,” Journal of Economic Behavior & Organization, 3 (4), 367-88. Hackman, J. R. & Oldham, G. R. (1976). “Motivation through the design of work: test of a theory,” Organizational Behavior and Human Decision Processes, 16 (2), 250 – 279. Heyman, James and Dan Ariely (2004), “Effort for Payment: A Tale of Two Markets,” Psychological Science, 15 (11), 787-93. Hsee, Christopher K., Yu, Fang, Zhang, Jiao, & Zhang, Yan (2003), “Medium Maximization,” Journal of Consumer Research, 30, 1-14. Mitchell, Terence R., Amy E. Mickel, (1999), “The meaning of money: An individual-difference perspective,” Academy of Management Review 24 (3) 568-578. Thaler, Richard (1999), “Mental accounting matters,” Journal of Behavioral Decision Making, 12, 183-206. Weber, Elke U. and Eric J. Johnson (2006), “Constructing Preferences from Memory,” in The Construction of Preference, ed. Sarah Lichtenstein and Paul Slovic, New York: Cambridge University Press, 397-410. Wildschut, Tim, Constantine Sedikides, Jamie Arndt, and Clay Routledge (2006), “Nostalgia: Content, Triggers, Functions,” Journal of Personality and Social Psychology, 91 (5), 97