New Advances in Mental Accounting: Underlying Mechanisms and Resultant Biases

Session Chair: Gülden Ülkümen, New York University
Discussion Leader: Eric Johnson, Columbia University

New Advances in Mental Accounting: Underlying Mechanisms and Resultant Biases

 

Biasing Effects of Temporal Framing on Budget Estimates and Expense Category Structure

Gülden Ülkümen*, New York University

Manoj Thomas, New York University

Vicki G. Morwitz, New York University

 

We uncover a framing bias in participants’ budget estimates such that the estimates provided by participants considering their annual budgets were three times as high as the comparable estimates provided by those considering their monthly budgets (study 1). A diary study revealed that annual budget estimates were accurate, whereas monthly budgets were underestimated. The bias in monthly estimates manifests only when the considered expense categories are broad (vs. specific), resulting in an intuitive (vs. calculative) estimation mode (study 3). We find that participants’ overconfidence in their intuitive estimates for the monthly budget is responsible for the observed effect (studies 4-5).

 

Breaking Open a Pot of Money: The Effect of Transgression Costs on Spending From Open and Closed Pots

Amar Cheema*, Washington University in Saint Louis

Dilip Soman, University of Toronto

 

We propose that consumers may incur a psychological transgression cost to break open a pot of money and spend from it. Thus, high transgression costs may deter spending. However, once a consumer incurs a transgression cost, subsequent spending from the pot may be easier. Bracketing one large pot of money into several smaller pots affects transgression costs and spending patterns. Consequences of transgression costs are demonstrated for purchase decisions with gift cards, for gambles with monetary implications, and for prepaid calling-card use. A transgression-related guilt measure and the moderating role of bracket artificiality provide additional support for the hypothesized process.

 

Happiness Pump

Yan Zhang*, The University of Chicago Graduate School of Business

Christopher K. Hsee, The University of Chicago Graduate School of Business

 

Consumers will be happy if the price of a product they buy decreases over time. However, the price cannot decrease indefinitely. To keep consumers happy and yet not to let prices decrease indefinitely, we propose a marketing strategy in which marketers first introduce a product with a high price, then decrease the price, then introduce a filler product to weaken consumers' memory of the target product's low ending price, then reintroduce the target price at its original high price, then decrease it again. An experiment shows that participants were happier in a condition using this strategy than in control conditions.

[ to cite ]:
Session Chair: Gülden Ülkümen and Discussion Leader: Eric Johnson (2006) ,"New Advances in Mental Accounting: Underlying Mechanisms and Resultant Biases", in NA - Advances in Consumer Research Volume 33, eds. Connie Pechmann and Linda Price, Duluth, MN : Association for Consumer Research, Pages: 632-636.