Do people spend more if they have more to spend?

Budgeting is the process of creating a plan for how to spend money. It is associated with financial wellbeing as it allows individuals to plan and cover expenses effectively, save for the future, and achieve financial goals. However, in economic psychology, it has been observed that budget size affects purchasing — reducing spending in some instances and increasing it in others. To understand this behavioral dichotomy, researchers from Duke University in the US conducted a study to reveal how budget influences consumer choices.   

The researchers explored consumers’ attention during online purchases while modifying the available budget size. They used eye tracking to measure how gaze behavior relates to the purchase choice at different budget levels. Participants were asked to complete a laboratory purchasing task where they were given a budget to buy an item, and their gaze behavior was recorded as they browsed. 

The results indicate that the likelihood of making a purchase increases with budget size, and that greater spending power leads to faster buying decisions. The attention data reveals the mechanism behind these results. When a decision to purchase depends on budget size, individuals tend to look back and forth between the budget and the price — especially when they have a larger budget. On the other hand, the gaze patterns of people whose decisions were not strongly influenced by budget exhibit more significant variability. If the budget size influences the decision to purchase, people generally exhibit a more consistent scan path. 

The study suggests that the salience of a high budget-to-purchase ratio may create a greater sense of ability to make a purchase. According to the study results, to avoid unnecessary purchases, setting a low budget-to-purchase ratio and keeping the budget visible while browsing for new items should lower the likelihood of making a purchase. 

 

Publication

Amasino, D. R., Dolgin, J., & Huettel, S. A. (2023). Eyes on the account size: Interactions between attention and budget in consumer choice. Journal of Economic Psychology, 102632.