Behavioural Science
You Can Bet Your Bottom Dollar

We all know it’s painful to run out of money at the end of the month, but new research shows that this can even affect our satisfaction with the items we purchase with the last few pennies in our bank accounts. It’s a phenomenon known as the bottom dollar effect.

In their experiment on the bottom dollar effect published in the Journal of Consumer Research, Robin Soster, Andrew Gershoff, and William Bearden gave their participants credits with which they could purchase short films, and asked them to rate their enjoyment of the films afterwards. Participants with only enough credits to purchase three films were significantly less satisfied with their third film choice than participants who had enough credits to buy two more, and satisfaction ratings steadily declined as budget dwindled. The authors suggest this decrease in satisfaction is due to the pain of paying, which occurs when we have to part with our money, being exacerbated as funds drop to zero. This feeling of discomfort is conflated with our opinion of the product we received in exchange.

The bottom dollar effect was modulated by the amount of effort that went into earning the credits; participants who had to perform a tedious task to earn their credits were significantly less satisfied with the last film they could afford, while the effect was reduced for those who received a windfall of free credits.

This is consistent with previous work on mental accounting: the way in which we think about different ‘pots’ of money, such as a salary versus a bonus, despite it all being the same on a rational level. In other words, one is likely to be less happy with an item bought with the last of their hard-earned salary than something bought with a bonus, which feels more like a treat. Intriguingly, the effect was also reduced by knowing that the supply of credits would soon be replenished; participants who were approaching the end of their budget did not show the bottom dollar effect when they knew they would receive more credits imminently. Moreover, participants who weren’t approaching their limit but knew they would not receive more credits for a while were far less satisfied with their choice.

In all, this study demonstrates that stress associated with running out of money is translated into dissatisfaction with the items we buy with the last of it, an effect which is influenced by how the money was earned and when the money would be replenished. In other words, go out and treat yourself on pay day, when you’ll be most satisfied with whatever you buy.

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