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Mental accounting (or psychological accounting) is a model of consumer behaviour developed by Richard Thaler that attempts to describe the process whereby people code, categorize and evaluate economic outcomes. [2]
Richard H. Thaler (/ ˈ θ eɪ l ər /; [1] born September 12, 1945) is an American economist and the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business.
Mental accounting is a behavioral bias that causes one to separate money into different categories known as mental accounts either based on the source or the intention of the money. [58] Anchoring. Anchoring describes when people have a mental reference point with which they compare results to. For example, a person who anticipates that the ...
Mental accounting theory helps form the basis for girl math. The main premise of it is the organization of money into different "mental buckets", such as one mental bucket for paying rent and one mental bucket for going shopping. This affects how one perceives financial gains and losses in relative instead of absolute terms.
Behavioral portfolio theory (BPT) combined mental accounting with the redefinition of risk as the probability of failing to achieve a goal, [4] and investors balance returns over-and-above their requirement with the risk of failing to achieve the goal. BPT also revealed a problem with adapting MPT.
John August List (born September 25, 1968) is an American economist known for his work in establishing field experiments as a tool in empirical economic analysis. Since 2016, he has served as the Kenneth C. Griffin Distinguished Service Professor of Economics at the University of Chicago, where he was Chairman of the Department of Economics from 2012 to 2018. [2]
Evolutionary psychology — Remnants from evolutionary adaptive mental functions. [59] Mental accounting; Adaptive bias — basing decisions on limited information and biasing them based on the costs of being wrong; Attribute substitution — making a complex, difficult judgment by unconsciously replacing it with an easier judgment [60 ...
This mental accounting phenomenon can impact budgeting, savings, and spending habits, as individuals prioritize their disposable income while discounting the portion withheld for taxes. Timing of gratification