Denomination Effect

The denomination effect is a theoretical form of cognitive bias relating to currency, whereby people are less likely to spend larger bills than their equivalent value in smaller bills.

In an experiment university students were given a dollar, either in quarters or as a single dollar bill. The students were then given the option to either save the money they had been given or to spend it on candy. Consistent with the theory, the students given the quarters were more likely to spend the money they were given.

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