Mental Account Research Articles

Research on Cultural Consumption from the Perspective of Mental Accounting

Behavioral economics emerged in the late 1970s and early 1980s. Compared to traditional economics, its theory is based on bounded rationality and combines with disciplines like psychology to address the limitations of traditional economic theory, providing more convincing explanations for market phenomena. Behavioral economics covers a wide range of topics, and this paper focuses on the perspective of mental accounting to study cultural consumption. Cultural consumption is the endogenous driving force for the development of the cultural industry. The psychological factors behind cultural consumption are key to influencing consumption decisions. Adopting the mental accounting theory from behavioral economics, residents' cultural consumption mental account consist of three main categories: economic capital account, cultural capital account, and social capital account, as well as six sub-accounts: transaction cost account, sunk cost account, leisure and entertainment account, aesthetic value account, social interaction account, and identity differentiation account. These accounts can effectively explain the influence mechanism between utility changes and cultural consumption behavior decisions. Based on the connotation and mechanism of the cultural consumption mental account theory, formulating various bundled sales strategies, reducing the sunk costs of cultural consumption, and promoting the high-quality development of the cultural industry are important paths to expand residents' cultural consumption. By integrating insights from behavioral economics, this approach can provide more effective solutions to boost cultural consumption and drive the sustainable development of the cultural industry.

A Clean Slate: Adapting the Realization Effect to Online Gambling and Its Effectiveness in People With Gambling Problems

ABSTRACTBetting more after losses (i.e., “loss‐chasing”) is a central clinical feature of disordered gambling. According to prospect theory, increasing risk‐seeking following losses could arise from a failure to “re‐reference.” By contrast, successful re‐referencing between successive decisions closes the mental account, and any losses are regarded as final or realized; gamblers should not chase realized losses. The present study sought to test this “realization effect” among gamblers using an ecologically valid online gambling task. We were further interested in whether the effectiveness of the loss realization varied as a function of problem gambling severity. Using online recruitment of past‐year gamblers stratified on the Problem Gambling Severity Index, we tested a group without gambling problems (n = 227), a group with at‐risk gambling (n = 239), and a group with gambling problems (n = 223). Over a sequence of nine bets, after the sixth bet, half of the participants underwent a simulated realization procedure that entailed cashing out from the gambling website and redepositing their remaining funds on another website. The feedback comparison group were shown their account balance after the sixth bet but did not withdraw or transfer their funds. In line with the realization effect, the group with non‐problem gambling significantly reduced their bet after cashing out. The realization procedure did not significantly ameliorate loss‐chasing in the groups with at‐risk gambling or gambling problems. We conclude that the realization effect can be elicited in an online gambling context but that stronger interventions for realizing losses may be required for people experiencing gambling problems.

The Ex-Dividend Effect for Reported Listed Companies in Taiwan

Past literature shows that investors use mental account when they are facing dividend distribution. That is, investors focus on dividend distribution and irrationally ignore the tradeoff of dividend payment and price decrease. The dividend is thus deemed as bonus to investors. Furthermore, investors tend to buy ex-dividend stocks after the ex-dividend day due to the expectation of price recovery. The buying forces around the ex-dividend day persistently push the price. After the ex-dividend, investors gradually become rational. The stocks thus are priced based on the fundametals. The overprice of stocks due to the ex-dividend events may consequently decreases. Past litearture regarding ex-dividend focuses on the announcemnet effect and ex-divend effect on the ex-dvidend day. The contribution of this project is to combine the issues of ex-dividend and media coverage to investigate whether the investing behavior bias of investors is strengthened after the coverage of ex-dividend news by media. Past literature has confirmed that investors refer to the media coverage when they are making stock picking decisions. However, the past literature did not further investigate the reaction of investors to the ex-dividend news. This study fills the gap of the literature to combine these two issues, which may provide a referecne for investors when they are making investing decisions.

Flexibility in jobs and autonomy on saving: Mental accounting of personal pension saving decision in Chinese part-time employees

The progression of the digital economy has led to a rise in the adoption of slash occupations by an expanding demographic, resulting in a more diverse wage structure. A portion of the wage is derived from full-time employment, while the remainder is part-time. This study uses a new China-specific survey dataset to investigate the impact of part-time wages (PTW) and full-time wages (FTW) on "autonomous" personal pension savings. The results are as follows: (1) The marginal impact of part-time wages on personal pension savings is significantly greater than that of full-time wages, which challenges the concept of monetary interchangeability and introduces the notion of mental accounting. (2) The mental account impact arises when part-time compensation is associated with "flexibility" in alignment with the prioritization of "autonomy" in individual pension savings. This result remains valid after statistical analysis and the elimination of alternative hypotheses. (3) There appears to be a threshold effect, as the effect of mental accounts on the relationship between part-time wages and personal pension savings progressively diminishes with increasing savings motivation but abruptly weakens as the proportion of part-time income increases. However, the mental account effect does not diminish with an increase in personal pension saving amount; rather, it amplifies. The mental account effect, according to this paper, signifies the emergence of individualistic consciousness, affords the opportunity for personal pension schemes, and is a crucial transitional step from "procedural" to "substantive" reason.

Mental accounting in tax liabilities

Mental accounting refers to a set of cognitive processes in which people code, categorize and evaluate money depending on where it came from and what they are going to spend it on, and this influences the way they make decisions. The concept of mental accounting violates the principles of standard economic theories, which consider money to be fungible or interchangeable. When people mentally account, they prefer to keep accounts separate and not to move money from one mental account to another. The current study aimed to investigate how people mentally account by designing a tax compliance laboratory experiment and using a variety of scenarios. In the first scenario, which involved different tax rate variations, participants were asked to pay tax on their earned and capital incomes. The results showed that participants formed separate mental accounts and treated their earned and capital incomes differently. Specifically, when faced with high tax rates of 60%, tax evasion was significantly higher for earned (labour) incomes compared to capital incomes. This willingness to cheat in order to protect labour income, suggests that individuals value their earned income more compared to income received from a given endowment (capital income). Interestingly, in subsequent scenarios involving different audit probabilities and fine rates, no mental accounting effects were found. In conclusion, this study provides initial experimental insights into the effects of mental accounting on taxpayer’s compliance, but further research is needed to explain nuanced findings and investigate tax decisions for different reference points and other sources of income.

Managing Mental Accounts: Payment Cards and Consumption Expenditures

Abstract Does mental accounting matter for total consumption expenditures? We exploit a unique setting in which individuals exogenously receive a new payment card, without requesting one. Using random variation in the time of receipt, we show that individuals temporarily increase total consumption expenditure by making purchases with the new card without reducing spending on the others. We do not observe a corresponding increase in indebtedness. Total consumption expenditure rises even for the least liquidity-constrained individuals. The evidence is consistent with consumers treating methods of payment as nonfungible budget categories, as suggested by models of mental accounting and narrow bracketing.

A Study on the Impact of Demographics Variable on Mental Accounting Bias of Individual Investors in Financial Decision

It has been asserted that investors' preferences for equities are influenced by their desires, cognitive flaws, and emotions. A succinct introduction to behavioural finance is given in this article. Research that rejects the conventional premises of expected utility maximisation with logical investors in efficient markets is referred to as behavioural finance. The study of psychology, according to financial economists, can explain stock market anomalies, market booms, and crashes as well as shed significant light on how unpredictable and erratic human behaviour can be. This has the potential to challenge the conventional wisdom that financial markets operate efficiently. Mental accounting bias is depicted in investor behaviour where Investors split their funds into many mental account tiers of a portfolio pyramid in order to achieve objectives like securing their retirement funds, paying for their kid's college, or being able to travel the world. In accordance with the organization's power, the law, and its obligation commitments, the paper outlines ideas to improve the efficacy of financial decisions and identifies the psychological effects' limitations. In Practical, proposals about the adoption, execution, and evaluation of financial decisions were made considering scarce funds and rising need.

Mental Accounts and Consumption Sensitivity Across the Distribution of Liquid Assets

Mental Accounts and Consumption Sensitivity Across the Distribution of Liquid Assets

A Study on Online Irrational Consumption of College Students Based on Mental Account Perspective

A Study on Online Irrational Consumption of College Students Based on Mental Account Perspective

Impact of household income on household energy consumption and energy poverty from a mental account perspective

Impact of household income on household energy consumption and energy poverty from a mental account perspective

Steady-state analysis of social responsibility strategy of coal power enterprises from the perspective of game theory

Under the dual-carbon background, coal power enterprises are required to actively fulfill their social responsibility in order to achieve energy saving and emission reduction as soon as possible. Considering the uncertainty of the external environment and the potential conflict of interest of the key stakeholders in the fulfillment of corporate social responsibility, coal power enterprises are not always positive in fulfilling their social responsibility. This paper combines prospect theory and mental account theory with evolutionary game to construct an evolutionary game model involving coal power enterprises, government regulators and the public to study the social responsibility behavior of coal power enterprises. The results of the study show that: (1) The social responsibility behavior of coal power enterprises under the dual-carbon background is a typical cost-driven behavior, and coal power enterprises are more sensitive to costs compared to benefits. (2) The formulation of regulatory policies by government regulators largely depends on the decision inertia of coal power enterprises, and the formulation of regulatory policies by government regulators will also affect the decision inertia of coal power enterprises. (3) The public's strategic choices do not entirely depend on the strategic choices of coal and power enterprises and government regulators, and are more closely related to the setting of the reference point. (4) In addition to the realistic factors, the subjective factors of decision makers are also important factors affecting the fulfillment of social responsibility of coal and power enterprises. Based on the results of the study, this paper proposes countermeasures to enhance the internal driving force of coal power enterprises to fulfill their social responsibility behaviors from the aspects of establishing a communication mechanism, improving the reward and punishment system, and strengthening risk management.

A Study of the Influence of Marketing Strategy on Consumer Impulse Buying Behavior During Online Shopping Festival from the Perspective of Mental Accounts

With the development of technologies such as big data, artificial intelligence, Internet of things and cloud computing, the infrastructure system of various industries has been reconstructed because of the prosperity of digital transformation. The online shopping festival has also become the product of the vigorous development of online shopping platforms, having attracted increasing attention from both researchers and practitioners as a special consumption scenario. Therefore, the research topic of this paper is to analyze the influence of various marketing strategies on consumers' impulsive shopping behavior during online shopping festival from the perspective of mental accounts. By analyzing a large amount of existing literature, this paper summarized the three most important marketing strategies: shopping atmosphere, characteristics of e-commerce live streaming and payment policies. Additionally, this paper makes a reasonable explanation for the mechanism of impulsive consumption behavior from the perspective of mental accounts which provides theoretical basis and practical guidance for e-commerce platforms and merchants to improve and optimize the marketing strategy of online shopping festival to attract and maintain the enthusiasm of consumers.

Influences of mental accounting on consumption decisions: asymmetric effect of a scarcity mindset.

A scarcity mindset is considered to impact consumer behaviors. Our research aimed to examine the moderating effect of the scarcity mindset on the relationship between mental accounting and hedonic (vs. utilitarian) consumption. We conducted an online experimental design (mental accounting: windfall gains vs. hard-earning gains; consumption: hedonic products vs. utilitarian products) and verified our hypotheses in two distinct samples: a student sample and an adult sample. Our results showed that consumers who received windfall gains tended to use it for hedonic consumption rather than utilitarian consumption. Intriguingly, such an effect was insignificant under a high level of a scarcity mindset but significant under a low level of the scarcity mindset. Moreover, consumers who received hard-earning gains tended to spend the money on utilitarian (vs. hedonic) consumption. However, we did not detect the impact of the scarcity mindset on such effects. Our research suggested an asymmetric effect of the scarcity mindset on hedonic (vs. utilitarian) consumption under two different mental accounts. It highlights the important role of the scarcity mindset in consumer behaviors, which leaves avenues for future research to understand marketing promotion strategies for distinct products.

Policy Note: Mental Accounts and Water Prices

Raising the price of municipal water services is highly fraught in many countries due to the political pressures to keep water bills affordable. As a result, most countries fail to recover the full costs of water provision, a problem made worse by an underestimation of the real cost of providing water. The case of Singapore illustrates that this problem is in part due to “mental accounting,” which is consistent with Lasswell’s concept of an “intelligence function.” Situating an understanding of this intelligence function within the Singapore water case gives a better understanding of the reluctance to raise water prices.

Entrepreneurial decisions: viewing the affordable loss heuristic from an economic well-being perspective

PurposeThis article conceptualises how the economic well-being of an entrepreneurial household affects its members' mental accounting process to establish its affordable loss for a plunge decision.Design/methodology/approachThe article used research literature to analyze the resources available for entrepreneurial endeavours against a household's ability to maintain acceptable minimum material living standards, juxtaposing income and wealth against competing consumption and investment opportunities.FindingsMentally accounting for whether household resources can meet minimum material living standards is central to entrepreneurs' ability to raise affordable loss and decide to invest in a new venture. The article proposes that entrepreneurial households establish affordable loss by availing their money exceeding that required to maintain acceptable minimum material living standards. In low-income households, the author assumes that members are not employed and can thus avail their time (versus money) towards affordable loss.Originality/valueEconomic well-being introduces mental accounts of income and wealth and a hedonic reference outcome in the material living standards of households required to meet basic needs. The article introduces the tension entrepreneurial households face between using their income and wealth towards investing in a new business and maintaining their material living standards. It introduces the idea that a loss can be “affordable” according to an entrepreneurial household's ability to remain above its acceptable minimum material living standard. This view prompts scholars to consider a household unit of analysis and avoid assuming an entrepreneur makes the plunge decision in isolation.

A behavioural investigation of the substitution phenomenon between tax-sheltered savings plans

Abstract We provide behavioral insights into the economic substitution phenomenon among front-loaded and back-loaded tax-sheltered savings plans. We conduct three behavioral studies with adult Canadian participants to show experimentally that substitution can occur and to explain why substitution can occur. The first study shows that participants transfer savings from a front-loaded plan to a back-loaded plan when the latter becomes available, consistent with a substitution effect. The second study examines how participants trade-off two unique features of back-loaded and front-loaded savings plans. Our results indicate that participants favor the back-loaded tax feature and a variable contribution limit (offered in a front-loaded plan). As participants prefer one feature from each type of plan, this finding can help explain why substitution occurs. The third study provides participants a categorization task with various household budgeting items, including savings items. Results show that 68.1% of participants categorize multiple tax-sheltered savings plans in the same mental account, again consistent with a substitution effect under a budget constraint. As both tax-sheltered savings plans in Canada are used for different purposes, this finding shows that participants tend not to distinguish between the purpose of saving in each account, consistent with a substitution phenomenon.

A joint account with my future self: Self‐continuity facilitates adjustment of present spending to future income changes

AbstractIs consumers' present spending influenced by future changes in their income? From an economic perspective, consumers should reduce present spending when anticipating a future income decrease and boost spending when anticipating a future income increase to maximize their welfare. We find that although consumers tend to adjust their spending to a future income decrease, they are less likely to do so to a future income increase. We show that this is, in part, due to a low sense of self‐continuity, a tendency to view the future self whose income increases as if it were a different person and, as a result, to categorize present and future income into two separate mental accounts. Enhancing self‐continuity leads consumers to combine present and future income in a single mental account, and thereby facilitates adjustment of present spending to a future income increase. Whereas prior work linked high self‐continuity to reduced present spending, we identify a context in which high self‐continuity can boost present spending. We discuss the implications of these findings for consumer well‐being.

Product Quality Matching Strategy in a Dual-Channel Supply Chain: A Perspective From Mental Accounting Theory in Behavioral Finance

We extend the mental accounting perspective to build models on product quality matching strategy, which is effective in resolving the conflict between traditional and online channels. We consider that perceived values of high-quality and low-quality products belong to different mental accounts, and construct three product quality matching strategies for a dual-channel supply chain. Comparing the profit of each member, we find that (1) the strategy where the traditional channel distributes premium products, while the e-tailer sells low-quality products, is most conducive to the manufacturer; (2) the profit elasticity of the e-tailer is larger than that of the traditional retailer; (3) traditional retailers should sell more price elastic products, and e-tailers should sell the product with lower price elasticity; and (4) the manufacturer has more monopoly power if consumers have a higher degree of acceptance for the online channel that distributes premium products.

Uncertain random portfolio selection with different mental accounts based on mixed data

Due to the complexity of security markets, securities with massive effective data, invalid data and insufficient data may exist at the same time. When there are massive effective data, the security returns are regarded as random variables, or they can be regarded as uncertain variables when the data are insufficient or invalid. The common portfolio selection problem assumes that the investors put money into one mental account for management. Considering that the investors invest money in separate accounts in reality, this paper discusses a portfolio selection problem with different mental accounts under uncertain random environment. Firstly, we formulate an uncertain random model for the portfolio optimization problem with random risky securities and uncertain risky securities. The chance distributions of uncertain random variables are derived when the variables obey different distributions. On this basis, two equivalent forms of the uncertain random portfolio model based on mental accounts are presented. Finally, numerical simulations with two and three mental accounts are conducted to analyze the reality and practicability of the established models.

The Influence of Advertising Language on Adolescents’ Consumption Perspectives from the Perspective of Behavioral Economics

Advertising leverages linguistic concepts and metaphorical techniques to enhance the persuasiveness and expressiveness of products. In the current era of widespread electronic devices and online shopping platforms, advertising exerts an unprecedented influence on consumer behavior, particularly among adolescents at the peak of their cognitive development. Adolescents are more susceptible to the impact of advertising language due to their unique psychological characteristics. This paper combines theories such as behavioral economics and mental accounts to analyze the underlying causes of irrational consumption behavior among adolescents within the context of China’s distinct mental account structure. The study aims to examine the influence of different advertising approaches on adolescents’ consumption attitudes from a social-psychological perspective. Additionally, it proposes reform policy recommendations, including strengthening government regulation, enhancing educational guidance, promoting social governance, and conducting empirical research, to contribute to the creation of a civilized and harmonious developmental environment for adolescents.