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Mental Accounting and Consumer Choice

4,875 citations0/0 files storedMarketing Science

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Decision-Making and Behavioral Economics Financial Literacy, Pension, Retirement Analysis Consumer Market Behavior and Pricing

Abstract

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 process is also incorporated to complete the characterization of mental accounting. Several implications to marketing, particularly in the area of pricing, are developed.

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2003A perspective on judgment and choice: Mapping bounded rationality.1998Are Investors Reluctant to Realize Their Losses?2009Instructional manipulation checks: Detecting satisficing to increase statistical power 1999Mental accounting matters 1998All Frames Are Not Created Equal: A Typology and Critical Analysis of Framing Effects 2001Investor Psychology and Asset Pricing 2005Value-based Adoption of Mobile Internet: An empirical investigation 1995The construction of preference.

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