Mental Account Research Articles

Managing Mental Accounts: Payment Cards and Consumption Expenditures

Managing Mental Accounts: Payment Cards and Consumption Expenditures

Mental account effect in non-cash payment of college students: The role of locus of control

Mental account effect in non-cash payment of college students: The role of locus of control

Salience and Persistent Reference Dependence: The Lasting Effect of Disaster Experience on the Mental Account of Risk

Salience and Persistent Reference Dependence: The Lasting Effect of Disaster Experience on the Mental Account of Risk

Role Integration Increases the Fungibility of Mentally Accounted Funds

Bridging the gap between the mental accounting and identities/roles literatures, the present research examines how the extent to which an individual's life roles (e.g., “employee,” “spouse”) are integrated (i.e., have more flexible and permeable psychological boundaries between them) moderates the fungibility of mentally accounted funds. Specifically, individuals with more integrated roles are more able to circumvent the constraints typically imposed by mental budgeting and earmarking; therefore, they are more likely to use funds that are allocated or budgeted for the purposes of one role to service the needs/wants of another role. This holds regardless of whether funds have been (1) allocated to a broader role-specific mental account for future expenditures or (2) earmarked for a specific purchase. The authors find evidence that the effect of role integration arises because those with more integrated roles believe that making purchases for one role using funds allocated or budgeted for the other role is more justifiable.

Supply Chain Coordination with Capital-Constrained and Loss Aversion Retailer under Stochastic Demand and Supply

In the face of increasingly complex market environment, supply chain members pay attention to the possibility of obtaining expected profits and various risks while considering profit maximization. The behaviors of decision makers are often influenced by their psychological preferences, and loss aversion is one of the basic characteristics of human economic behavior. We research the supply chain coordination problem with capital constraint and loss-averse retailer in the case of stochastic production and demand. In order to address the loss aversion, a novel utility function is structured according to the theory of mental account. Under wholesale price contract, the optimal expected utility of supply chain under decentralized decision is smaller than that under centralized decision due to the retailer’s constrained capital. Based on that, a model is constructed by making revenue sharing contract act as the dual role of supply chain coordination and delayed payment strategy without seeking external financing or internal financing, and the contract conditions and optimal decisions of the coordinated supply chain are solved. Theoretical analysis indicates that when the contract parameters are properly selected, even though the retailer’s capital is constrained, the revenue sharing contract can not only coordinate the supply chain but also realize the arbitrary distribution of supply chain profits within a certain range. Finally, the change of decision variables and expected utility or profit with contract parameters is analyzed by several numerical examples.

Bounded rational real‐time charging pricing strategy under the traffic‐grid coupling network

This study proposes a bounded rational charging guidance strategy based on mental account theory, which guides users to charge in an orderly manner by formulating real-time charging prices. Firstly, an orderly guidance framework for fast-charging EVs under the traffic-grid coupling network is constructed, and the influencing factors of various dimensions when users make charging decisions are analysed. Secondly, considering the bounded rational behaviour of users when making charging decisions, a multifactor bounded rational charging model for EV users based on mental account theory is proposed so as to obtain different charging costs for users when selecting charging stations. On this basis, a real-time charging price strategy based on the Stackelberg game model is constructed, with the goal of maximising the economic benefits of charging station operators while reducing the charging cost of EV users as much as possible. Finally, the particle swarm optimisation algorithm is used to solve the game model so as to solve the real-time charging price under various constraints. The simulation of an example verifies the rationality of the proposed real-time charging price formulation method and the superiority of the bounded rational charging guidance strategy.

Evolutionary Game Analysis of Shared Manufacturing Quality Synergy under Dynamic Reward and Punishment Mechanism

Quality improvement is crucial for manufacturing, and existing research has paid less attention to the influence of regulatory factors and irrational factors of decision makers. Considering the impact of the reward and punishment strategy of the shared platform on quality decision-making, this paper introduces prospect theory and mental account theory into the process of multi-agent evolutionary game of shared manufacturing, constructs a co-evolutionary game model of shared manufacturing quality synergistic improvement under the dynamic reward and punishment mechanism, and analyzes the dynamic evolution law of each game agent. The research results show that: (1) The synergistic improvement of shared manufacturing quality is the consequence of the combined action of numerous interrelated and interacting factors, rather than the linear effect of a single element. (2) Although the combination of multiple incentive and punishment methods can significantly alter the effect of shared manufacturing quality synergy, there are certain effectiveness gaps. (3) The subsidy mechanism can effectively compensate for the effectiveness gap of the reward and punishment mechanism, and it can also strengthen the internal driving force of shared manufacturing quality coordination. The main management insights are as follows: (1) Consider strong external regulation to be the framework constraint, and positive internal control to be the detail specification. (2) Create a reliable reward and punishment mechanism and dynamically alter the intensity of rewards and penalties. (3) To close the effectiveness gap, strengthen the subsidy mechanism as an essential addition to the incentive and punishment mechanisms. This study can give a new reference path for quality improvement of shared manufacturing, allowing shared manufacturing to play a more constructive role in supporting the transformation and development of the manufacturing industry.

On the role of similarity in mental accounting and hedonic editing.

The theory of mental accounting is often used to understand how people evaluate multiple outcomes or events. However, a model predicting which outcomes are associated with the same mental account and evaluated jointly, versus different accounts and evaluated separately, has remained elusive. We develop a framework that incorporates an online, bottom-up process of similarity and categorization into mental accounting operations. In this categorization-based model of mental accounting, outcomes that overlap on salient attributes are automatically categorized and assigned to the same mental account while outcomes that do not overlap on salient attributes are assigned to different accounts. We use this model to derive the hedonic accounting hypothesis, which generates testable behavioral predictions on people's preferences over the timing of outcomes given similarity-based constraints on mental accounting operations. Six studies provide support for the predictions: People prefer to experience similar losses close together in time and spread dissimilar losses apart; the reverse is true for gains, with a preference for dissimilar gains close together in time and similar gains spread apart across time. Importantly, our model is able to rationalize prior evidence that has found only limited support for the predictions of mental accounting and hedonic editing. Once the psychological process of similarity and categorization is explicitly incorporated into a formal model of mental accounting, its predictions are supported by the data. (PsycInfo Database Record (c) 2022 APA, all rights reserved).

Product rollover and direct sales decisions in dual-channel supply chains

This study investigates product rollover and direct sales decisions in a supply chain with one fashion manufacturer and one retailer when two style generations are sequentially introduced to the market over two periods. The retailer serves as the exclusive sales channel during the introductory period of a style generation. Both the retailer and manufacturer are capable of selling the old style generation in the second period. The retailer adopts dual rollover if she sells the old style generation, and single rollover if she does not. We develop a two-stage game to explore the chain members’ equilibrium decisions while accounting for the manufacturer’s cost inefficiency in direct sales and consumers’ mental account deficit. We find that the manufacturer’s cost inefficiency has double-edged effects and can offset the negative effect of consumers’ mental account deficit on the introduction of a new style generation. Furthermore, a win–win outcome can be achieved when the manufacturer with an intermediate level of cost inefficiency engages in direct sales and consumers have high valuations of the old style generation or when the manufacturer with significant cost inefficiency does not engage in direct sales.

Effect of Frugality and Cognition on Forest Health Tourism Intention-A Mediating Effect Analysis Based on Multigroup Comparison.

At present, the market demand for forest health tourism is weak. The main purpose of this study is to investigate whether frugality inhibits the intention of forest health tourism and whether the positive effect of cognition on the intention of forest health tourism can compensate for the inhibition of frugality. Based on mental account theory and planned behavior theory, this study constructs a structural equation model with intermediary variables—health consumption mental account and forest health consumption attitude. According to the results of the path analysis of the data, which was collected through the questionnaire survey of urban residents, the positive influence of cognition can compensate for the inhibitory effect of frugality. On this basis, mediating effect analysis based on multigroup comparison is further carried out. This study verifies for the first time the inhibitory effect of frugality on the intention for forest health tourism, enriches the theoretical system of tourism consumer behavior, and provides a scientific basis for the market positioning of forest health and the formulation of marketing strategies.

번들제품 유형이 양가적 반응에 미치는 영향: 제품특성(평가속성기준, 대안수)과 소비자특성(심적 계좌, 심적 시뮬레이션)의 조절효과를 중심으로*

This study is to investigate the influence of bundling type on ambivalent response which is a state of having simultaneous conflicting reactions, beliefs, or feelings towards bundled packaging. It is hypothesized that hedonic bundled packaging would trigger ambivalent response more than utilitarian one. And it examines the moderating roles of product characteristic variables such as criteria of evaluation attribute and choice set size on the relationship between bundling type and ambivalent response. It also looks into the moderating effects of consumer characteristic variables such as mental account, mental simulation on the relationship between bundling type and ambivalent response. Hypotheses are set as follows. H1: The influence of the bundling type on ambivalent response will be different. Specifically, hedonic bundled packaging will be likely to have higher influence on ambivalent response than utilitarian one. H2: The influence of the bundling type on ambivalent response will vary depending on the criteria of evaluation attribute. H2-1: In the case of the utilitarian bundled packaging, multi-finality will be likely to have higher influence on ambivalent response than uni-finality. H2-2: In the case of the hedonic bundled packaging, uni-finality will be likely to have higher influence on ambivalent response than multi-finality. H3: The influence of the bundling type on ambivalent response will vary depending on the choice set size. H3-1: In the case of the utilitarian bundled packaging, large number of alternatives will be likely to have higher influence on ambivalent response than small number of ones. H3-2: In the case of the hedonic bundled packaging, small number of alternatives will be likely to have higher influence on ambivalent response than large number of ones. H4: The influence of the bundling type on ambivalent response will vary depending on the mental account. H4-1: In the case of the utilitarian bundled packaging, the mental account will be likely to have no interaction effect on the relationship between bundling type and ambivalent response. H4-2: In the case of the hedonic bundled packaging, the specific level of the mental account will be likely to have higher influence on ambivalent response than the comprehensive level of the mental account. H5: The influence of the bundling type on ambivalent response will vary depending on the mental simulation. H5-1: In the case of the utilitarian bundled packaging, the process-focused simulation will be likely to have higher influence on ambivalent response than the outcome-focused simulation. H5-2: In the case of the hedonic bundled packaging, the outcome-focused simulation will be likely to have higher influence on ambivalent response than the process-focused simulation. Several experiment are conducted to collect data. The subject samples are selected from college students using convenience sampling method in Daejeon Metropolitan City. Laundry detergent and ramen are selected as experimental products. The data are analyzed with IBM SPSS 24.0 statistics program. T-test (H1) and 2×2 analysis of variance (H2, H3, H4, H5) are used to test the hypotheses. In addition, frequency and reliability analysis are conducted. The results of the study can be summarized as follows. First, it is revealed that bundling type has different influence on ambivalent response of bundled product. Specifically, hedonic bundled packaging triggers higher influence on ambivalent response than utilitarian one. Second, it shows that the criteria of evaluation attribute has a moderating role on the type of bundling type affecting ambivalent response. In the case of the utilitarian bundled packaging, multi-finality has higher influence on ambivalent response than uni-finality. In the case of the hedonic bundled packaging, uni-finality has higher influence on ambivalent response than multi-finality. Third, it shows that the choice set size has a moderating role on the type of bundling type affecting ambivalent response. In the case of the utilitarian bundled packaging, large number of alternatives has higher influence on ambivalent response than small number of ones. In the case of the hedonic bundled packaging, small number of alternatives has higher influence on ambivalent response than large number of ones. Fourth, the mental simulation has a moderating role on the type of bundling type affecting ambivalent response. In the case of the utilitarian bundled packaging, there is no difference on ambivalent response depending on the type of mental account. In the case of the hedonic bundled packaging, the specific level of the mental account has higher influence on ambivalent response than the comprehensive level of the mental account. Fifth, mental simulation has a moderating role on the type of bundling type affecting ambivalent response. In the case of the utilitarian bundled packaging, the process-focused simulation has higher influence on ambivalent response than the outcome-focused simulation. In the case of the hedonic bundled packaging, the outcome-focused simulation has higher influence on ambivalent response than the process-focused simulation. In the end, the implications, limitations and future research directions based on the study results are discussed and suggested.

A mental account-based portfolio selection model with an application for data with smaller dimensions

With the rapid development of Robo-adviser, behavioral portfolio theory (BPT) has been drawing good attention. However, the existing BPT models always assume the assets’ returns are normally distributed and cannot be solved efficiently when the number of assets is large. To circumvent these limitations, this paper proposes a new portfolio selection model with two mental accounts in which the lower-level (safety) is set up to avoid loss while the upper-level (self-actualization) need corresponding to the mental account is set up to get a good profit. To relax the normality assumption, we formulate our proposed model by replacing the probability terms with the expectation of indicator function and designing a sequential convex approximation algorithm to solve the proposed model. Also, we prove that the optimal portfolio obtained by our proposed algorithm converges when analyzing data with small dimensions.Last, we carry out empirical studies by using trading data with 30 stocks from the American stock market to demonstrate the superiority, effectiveness, and robustness of our proposed portfolio selection in a smaller dimension case because our method is suitable only for small dataset. By comparing the characteristics of the optimal portfolio and the out-of-sample performance of our proposed portfolio selection model with the corresponding traditional portfolio selection models, we find that our new model not only derives the optimal portfolio with moderate diversification, but also obtain the highest average return and the highest Omega ratio in the out-of-sample testing period. Extensive experiment results by using different sample sizes, different frequencies, and employing the rolling-time window approach also confirm that our proposed portfolio selection model performs the best when we compare both the highest cumulative return and the Omega ratio in the out-of-samples.

Dividends, Return and Consumption

Based on empirical evidence, households consume dividends from common stock at a much higher rate than the rise in its price. This pattern is consistent with consumption from durable, predictable, and permanent sources of income as compared with non-durable income. Such a separate tracking of dividends and capital gains is not consistent with the notion of return as the combination of both: price appears to convey performance as compared to return. Empirical studies show that dividend yield predicts return in the short and the long horizons, particularly when the effects of repurchase activities as well as cash flow transfers to equity holders are included. The various empirical findings show, in part, that the market price of the stock does not decline as a result of the payment of cash dividend by as much as the elegant hypothesis of Miller and Modigliani implies. Behavioral finance provides some explanations in this regard as investors appear to view dividends as given, and place it in a mental account separate from the rise in price of the stock and not as an integral part of return.

The effect of different quantity promotion discounts on inaction inertia: The internal mechanisms of perceived closeness and mental accounting

AbstractInaction inertia is the phenomenon in which people are less likely to accept an opportunity after having previously missed a relatively superior one. Based on previous studies of inaction inertia, psychological distance, and quantity promotions, the current research explores how missing different quantity promotion discounts (multiple discount vs. single large discount vs. single small discount) influences inaction inertia and relevant mediators. The results of three experiments demonstrate a missed quantity promotion with a single small discount (e.g., “buy 3, get 25% off”), compared with a missed single large discount (“buy 5, get 40% off”) or a multiple discount (e.g., “buy 3, get 25% off, or buy 5, get 40% off”), inducing higher inaction inertia through enhanced perceived closeness, upward counterfactual thinking, and perceived regret. Compared with missing a multiple‐discount promotion, missing a single large‐discount promotion enhances inaction inertia. However, the effect is only mediated through the number of upward counterfactual thoughts and perceived regret. These findings indicate perceived closeness, and assignments to specific mental accounts are important internal mechanisms activating inaction inertia.

Managing Mental Accounts: Payment Cards and Consumption Expenditures

Managing Mental Accounts: Payment Cards and Consumption Expenditures

Health comes first: Smart heuristics to stay healthy

In the classical "jacket-calculator" dilemma it is postulated decision is regulated by a mental topical accounting process which orients people to consider a discount price when purchasing items. We proposed an adapted version of the classical "jacket-calculator" task re-framing the choice in a medical context. Our results supported the view that simple minimal mental accounts influence evaluation and choice in the medical context where time, instead of price, represents a fundamental cue of the decision analysis. The decision process adopted by participants tended to be associated with a lexicographic decision mechanism where "time" appears the most effective cue of a "take-the-best" heuristic to predict people's behaviour accurately. These findings broaden the body of evidence indicating that bounded rationality in human decisions is intrinsically connected with the decisional context and different contexts may elicit different mental accounting strategies. In addition, the study stressed the need to enhance the dialogue between the more recent paradigm of the ecological rationality with the classical interpretations of bounded rationality because the two paradigms, not rarely opposed to each other, can provide hints to the interpretation of the decision process, with practical considerations for future interventions in health education and public health.

Outbound vs. domestic travel expenditure: the lens of thaler’s mental account and family utility function

ABSTRACT Traditional theories of consumer economy suggest that outbound tourism expenditure may inhibit domestic tourism expenditure. However, little is known about whether the effect really exists. This study applied Thaler’s Mental Accounting Theory and the Family Utility Function Model to test the relationship between domestic and outbound tourism expenditure using a sample of 1,147 Chinese travelers. The study suggests that outbound tourism expenditure has a promotional effect on domestic tourism expenditure, because: 1) the majority of Chinese travelers’ outbound tourism is still characterized by sightseeing tours with shallow experiences, and 2) unsatisfied needs and expenditures in outbound travel can promote expenditures in domestic tourism. The study makes two important theoretical contributions. First, findings of the study helped to solve the disagreement on the relationships between domestic and outbound expenditures by applying the Mental Accounting Theory. Second, it considered characteristics of both tourism products and tourists’ experiences’ influence on the allocation of travel expenditures. Given the influence of the pandemic which prohibited outbound travel, such a study is timely and has meaningful empirical implications.

Mental accounts with horizon and asymmetry preferences

This paper extends mental accounting theory with an investment horizon and asymmetric trade-off between extreme gains and losses. This horizon-asymmetry mental accounting (HAMA) framework widens the spectrum of investors’ optimal portfolio choices considerably. Risk aversion, implied from the mean-variance portfolio theory, and the bond-to-stock ratio decline with the investment horizon. HAMA investors with a large gain–loss asymmetry trade-off are more concerned about skewness and kurtosis rather than variance. To apply the model to United States stock data, we develop a parsimonious semi-parametric version of HAMA that relies on the moments of return distributions. The analysis of optimal portfolios shows that investors who care significantly about upside potential hold asymmetric, leptokurtic, and less diversified allocations.

Mean-entropy uncertain portfolio with risk curve and total mental accounts under multiple background risks

In the previous uncertain portfolio literature on background risk and mental account, only a general background risk and a few kinds of mental accounts were considered. Based on the above limitations, on the one hand, the multiple background risks are defined by linear weighting of different background asset risks in this paper; on the other hand, the total nine kinds of mental accounts are comprehensively considered. Especially, the risk curve is regarded as the risk measurement of different mental accounts for the first time. Under the framework of uncertainty theory, a novel mean-entropy portfolio model with risk curve and total mental accounts under multiple background risks is constructed. In addition, transaction fees, chance constraint, upper and lower limits and initial wealth constraints are also considered in our proposed model. In theory, the equivalent forms of the models with different uncertainty distributions (general, normal and zigzag) are presented by three theorems. Simultaneously, the corresponding concrete expressions of risk curves are obtained by another three theorems. In practice, two numerical examples verify the feasibility and effectiveness of our proposed model. Finally, we can obtain the following unique and meaningful findings: (1) investors will underestimate the potential risk if they ignore the existence of multiple background risks; (2) with the increase of the return threshold, the return of the sub-portfolio will inevitably increase, but investors also bear the risk that the risk curve is higher than the confidence curve at this time.

Mental accounting and consumption of self-produced food

This is an exploratory study on mental accounting and food budgeting of agricultural households, in which we assumed that agricultural households may have a mental account for consumption of their self-produced food. Accordingly, they may reserve a certain quantity of self-produced food as a set budget for own consumption, implying that they may keep on consuming their own produce until they have consumed the quantity set for the mental budget. By making the mental accounting assumption, we hypothesized that the consumption of self-produced food is independent of market price. Also, we hypothesized that the consumption of self-produced food is increasing in the quantity of production if production is lower than the set budget, and independent of the quantity of production if production exceeds the set budget. By applying a double-log demand model and using survey data from six poor rural counties in China, we tested these hypotheses for five food items, which are rice, flour, potatoes, pork, and eggs. We found that the hypothesis of no significant effect of price holds for flour, potatoes, and pork if production is lower than the set budget, and for rice, pork, and eggs if production is higher than the set budget. Production has a significant positive effect on consumption of self-produced food but with a much greater influence when production is lower than the set budget for all five food items. These findings partly support our assumption of mental accounting of self-produced food. Limitations, policy implications, and possible future studies are discussed.