TY  - JOUR
AU  - Hastings,Justine
AU  - Shapiro,Jesse M.
TI  - Mental Accounting and Consumer Choice: Evidence from Commodity Price Shocks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18248
PY  - 2012
Y2  - July 2012
UR  - http://www.nber.org/papers/w18248
L1  - http://www.nber.org/papers/w18248.pdf
N1  - Author contact info:
Justine S. Hastings
Brown University
Department of Economics
64 Waterman Street
Providence, RI 02912
Tel: 203/432-3714
Fax: 203/432-6323
E-Mail: justine_hastings@brown.edu

Jesse M. Shapiro
University of Chicago
Booth School of Business
5807 S. Woodlawn Avenue
Chicago, IL 60637
Tel: 773/834-2688
Fax: 773-753-0563
E-Mail: jmshapir@uchicago.edu
M2  - featured in NBER digest on 2012-12-01
AB  - We formulate a test of the fungibility of money based on parallel shifts in the prices of different quality grades of a commodity. We embed the test in a discrete-choice model of product quality choice and estimate the model using panel microdata on gasoline purchases. We find that when gasoline prices rise consumers substitute to lower octane gasoline, to an extent that cannot be explained by income effects. Across a wide range of specifications, we consistently reject the null hypothesis that households treat “gas money” as fungible with other income. We evaluate the quantitative performance of a set of psychological models of decision-making in explaining the patterns we observe. We also use our findings to shed light on extant stylized facts about the time-series properties of retail markups in gasoline markets.
ER  -