Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

Payment Depreciation: the Behavioral Effects of Temporally Separating Payments From Consumption

John T. Gourville and Dilip Soman
Journal of Consumer Research
Vol. 25, No. 2 (September 1998), pp. 160-174
Published by: Oxford University Press
DOI: 10.1086/209533
Stable URL: http://www.jstor.org/stable/10.1086/209533
Page Count: 15
  • Download ($14.00)
  • Subscribe ($19.50)
  • Cite this Item
Item Type
Article
References
Payment Depreciation: the Behavioral Effects of Temporally Separating Payments From Consumption
Preview not available

Abstract

Research suggests that individuals mentally track the costs and benefits of a consumer transaction for the purpose of reconciling those costs and benefits on completion of the transaction (Prelec and Loewenstein 1998; Thaler 1980, 1985). In transactions where costs precede benefits, this can lead to a systematic and economically irrational attention to sunk costs (Arkes and Blumer 1985; Thaler 1980). In this article, we consider economic exchanges in which costs significantly precede benefits, as with many prepayment types of consumer transactions. We predict a consumer will gradually adapt to a historic cost with the passage of time, thereby decreasing its sunk‐cost impact on the consumption of a pending benefit. We label this process of gradual adaptation to costs “payment depreciation.” In a series of experiments, we find evidence of payment depreciation across a range of consumer transactions and offer insight into the behavioral implications of temporally separating costs from benefits.

Page Thumbnails