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Mental Accounting and Consumer Choice

Richard Thaler
Marketing Science
Vol. 4, No. 3 (Summer, 1985), pp. 199-214
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/183904
Page Count: 16
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Mental Accounting and Consumer Choice
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Abstract

A new model of consumer behavior is developed using a hybrid of cognitive psychology and microeconomics. The development of the model starts with the mental coding of combinations of gains and losses using the prospect theory value function. Then the evaluation of purchases is modeled using the new concept of "transaction utility". The household budgeting process is also incorporated to complete the characterization of mental accounting. Several implications to marketing, particularly in the area of pricing, are developed.

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