Invest now, drink later, spend never: On the mental accounting of delayed consumption

Eldar Shafir, Richard H. Thaler

Research output: Contribution to journalArticle

56 Scopus citations

Abstract

Monetary transactions in which consumption is temporally separated from purchase naturally lend themselves to multiple frames and to alternative accounting schemes, which nonetheless maintain a modicum of discipline and authenticity. We investigate some of the relevant accounting rules, and find that advanced purchases (e.g., a case of wine) are typically treated as "investments" rather than spending. At the same time, consumption of a good purchased earlier and used as planned (a wine bottle opened for dinner) is often coded as "free", or even as savings. However, when it is not consumed as planned (a bottle is dropped and broken), then the relevant account, long dormant, is resuscitated and costs associated with the event are perceived as the cost of replacing the good, especially if replacement is actually likely. Related phenomena and assorted implications are discussed.

Original languageEnglish (US)
Pages (from-to)694-712
Number of pages19
JournalJournal of Economic Psychology
Volume27
Issue number5
DOIs
StatePublished - Oct 1 2006

All Science Journal Classification (ASJC) codes

  • Applied Psychology
  • Sociology and Political Science
  • Economics and Econometrics

Keywords

  • Intertemporal choice
  • Mental accounting

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