BEHAVIORAL SCIENCES WORKSHOP
Abstract: We document the phenomenon of “depletion aversion:” people avoid spending from accounts when doing so would completely deplete those accounts, even when depleting the accounts might make financial sense. For example, we find that people would rather pay a $500 expense from an account with a $1000 balance than from one with a $500 balance, even if the $1000 account pays interest at a higher rate. We consider why this effect may arise, and we identify boundary conditions of the effect. Broadly speaking, depletion aversion seems to arise for savings-oriented accounts (e.g., typical bank accounts) but not for spending-oriented accounts (e.g., gift cards, or accounts earmarked for a specific expense, such as a vacation savings account). We consider implications for saving and spending.
Robyn LeBoeuf is professor of marketing at Olin Business School, Washington University in St. Louis. Much of her research has examined how people’s choices, judgments, and behaviors can be biased by incidental factors. Her recent projects have investigated how people plan for, and make decisions about, the future, and how people make decisions when giving gifts. She earned her PhD in psychology at Princeton University, and she has published articles in a variety of leading psychology and marketing journals. She was a recipient of the Hillel Einhorn New Investigator Award and was recently named to the Poets & Quants list of Top 50 Undergraduate Business Professors.
This workshop series is cosponsored by the Center for the Study of American Politics (CSAP) and the School of Management’s International Center for Finance and Whitebox Advisors fund.