Building on past research on judgment anchoring, we investigate the effect of price
information on consumers’ choice of denomination when making a purchase. Across
seven experiments, including two in the field (N = 4,020), we find that people tend
to purchase with denominations that are the same as the product prices. They use
larger denominations for higher priced products that are priced at the value of the
denomination held, and smaller denominations for lower priced products that are
priced at the value of the smaller denomination held. The effect is not explained
by storage or purchase convenience. We propose the “price-denomination effect” is
driven by consumers anchoring on product price and then choosing the denomination
that matches the anchor. The effect replicates across participants from different
continents (United States, Europe, and Africa) and samples (online panelists, and actual
consumers), as well as prices in different currencies (United States $, €, and Nigerian
Naira). We further demonstrate that people’s preference for denominations also affects
the choice of the form of payment used: cash versus card. Consumers are more likely
to use cash (vs. card) when product price is exactly the same as a denomination held.
We conclude with a discussion of theoretical and practical implications
