Mental Accounting

What is Mental Accounting

Mental 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. Mental accounting incorporates the economic concepts of prospect theory and transactional utility theory to evaluate how people create distinctions between their financial resources in the form of mental accounts, which in turn impacts the buyer decision process and reaction to economic outcomes. People are presumed to make mental accounts as a self control strategy to manage and keep track of their spending and resources. People budget money into mental accounts for savings or expense categories. People also are assumed to make mental accounts to facilitate savings for larger purposes. Mental accounting can result in people demonstrating greater loss aversion for certain mental accounts, resulting in cognitive bias that incentivizes systematic departures from consumer rationality. Through increased understanding of mental accounting differences in decision making based on different resources, and different reactions based on similar outcomes can be greater understood.

How you will benefit

(I) Insights, and validations about the following topics:

Chapter 1: Mental accounting

Chapter 2: Utility

Chapter 3: Behavioral economics

Chapter 4: Risk aversion

Chapter 5: Prospect theory

Chapter 6: Consumer choice

Chapter 7: Coase theorem

Chapter 8: Loss aversion

Chapter 9: Expected utility hypothesis

Chapter 10: Status quo bias

Chapter 11: Endowment effect

Chapter 12: Richard Thaler

Chapter 13: Hyperbolic discounting

Chapter 14: Equity premium puzzle

Chapter 15: Social value orientations

Chapter 16: Regret (decision theory)

Chapter 17: Choice architecture

Chapter 18: Willingness to accept

Chapter 19: Preference (economics)

Chapter 20: Preference

Chapter 21: Uncertainty effect

(II) Answering the public top questions about mental accounting.

(III) Real world examples for the usage of mental accounting in many fields.

Who this book is for

Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of Mental Accounting.