A new model of consumer behavior is developed using a hybrid of cognitive psychology and microeconomics. The development of the model starts with the mental coding of combinations of gains and losses using the prospect theory value function. Then the evaluation of purchases is modeled using the new concept of “transaction utility.” The household budgeting …
Tag Archives: mental accounting
Levav, J., &McGraw, A. P. (2009). Emotional accounting: How feelings about money influence consumer choice. Journal of Marketing Research, 46(1), 66-80.
Mental accounting posits that people track their expenditures using cognitive categories or “mental accounts.” The authors propose that this cognitive process can be complemented by an approach that examines how feelings about a sum of money, or the money’s “affective tag,” influence its consumption. When people receive money under negative circumstances, this tag can include …
Shafir, E., &Thaler, R. H. (2006). Invest now, drink later, spend never: On the mental accounting of delayed consumption. Journal of economic psychology, 27(5), 694-712.
Monetary transactions in which consumption is temporally separated from purchase naturally lend themselves to multiple frames and to alternative accounting schemes, which nonetheless maintain a modicum of discipline and authenticity. We investigate some of the relevant accounting rules, and find that advanced purchases (e.g., a case of wine) are typically treated as “investments” rather than …
Prelec, D., &Loewenstein, G. (1998). The red and the black: Mental accounting of savings and debt. Marketing science, 17(1), 4-28.
In the standard economic account of consumer behavior the cost of a purchase takes the form of a reduction in future utility when expenditures that otherwise could have been made are forgone. The reality of consumer hedonics is different. When people make purchases, they often experience an immediate pain of paying, which can undermine the …