So . . . twice this week I have written about change. One post was about how we sometimes need to change ourselves to get out of a repetitive cycle, and the other was about how we tend to resist change. Today I'm writing about a different kind of change - spare change. I have been doing some research into how people value money apart from it's explicit denomination, and in the name of shameless self-promotion, I'm going to tell you about it. Put another way, spare a penny for my thoughts about pennies after the jump.
This research came about because of an article I read in mental_floss magazine (full of useless facts and trivia, and very entertaining). It seems that Americans are very resistant to any change from dollar bills to dollar coins, despite multiple efforts over several decades to get them to do so. A few years ago, for example, the presidential coin series was announced to great fanfare and apathy. Americans don't want dollar coins, and this refusal to change to change costs the U.S. mint over $500 million per year (though coins cost more to produce, they last about fifteen times longer than bills).
So that got me thinking - maybe it's just that people don't see coins as being as valuable as bills. Naturally an average coin is worth less than an average bill, because all around the world higher denominations are in bills and lower denominations in coins. But if you had one of each of the same denomination, would they be valued differently? My anticipated answer lies in what I wrote above - the difference between an average coin and average bill. There is something called the representativeness bias, wherein an instance is averaged to its category. So even if you know little about the one example, you assume things about it from its category. For example, if the Rock has a new movie coming out I will assume that it is somewhat dumb, because the average Rock movie is dumb. Likewise, when I see a coin I assume it to be worth relatively less, and a bill to be worth relatively more, because I'm averaging to the category.
To test this I had people estimate how many of each of nine items (e.g. paper clips, Skittles, pencils) they could buy with either a dollar bill or a dollar coin. For reasons I'm not getting into here (past research findings), I needed to use one unit of each (i.e. I couldn't use a dollar bill and compare it to four quarters) and I needed both the bill and coin to be equally familiar or unfamiliar. Seeing as how I have family ties to Trinidad and Tobago, and they happen to have both a one dollar bill and one dollar coin in regular circulation (though hardly anyone knows about the coin, much like in the U.S.), I used those currencies. Anyone who was familiar with them would just have their responses removed from the analysis.
What I found was that people who were given a dollar coin thought they could buy fewer items than those given bills (216 items with coins, 326 with bills). This wasn't even the most interesting part though. I had also asked people how many Canadian dollars they could buy with the coin or bill. I had already told them that the exchange rate between Trinidadian and Canadian money was about 1:1 (not true - the real rate is about 6:1, but I didn't want any math issues), so there was little reason for there to be variance between responses - most people should give "one" as an answer. Well, there was variance - people given coins thought they could buy about 80 cents and people given bills thought they could buy about $1.20 Canadian.
I have since done another study involving both Americans and Canadians, given that Americans have lower-value coins than we do, and the results are striking - the difference between the valuation of coins and bills is much greater among Yanks than Canucks. So the bias is real, and seems to be based on representativeness.
So all of that change on your dresser collecting dust is worth more than you probably think. Collect it up and go buy yourself something nice. Respect your change for a change.
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