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Effects of Payment Mechanism on Spending Behavior: The Role of Rehearsal and Immediacy of Payments

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  • Soman, Dilip
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    Abstract

    Past expenses have been shown to influence future spending behavior by depleting available budgets. However, a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them. This article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending. Specifically, past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid (rehearsal) and when the consumer's wealth is depleted immediately rather than with a delay (immediacy). Two experiments show support for the proposed theoretical framework. Copyright 2001 by the University of Chicago.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Consumer Research.

    Volume (Year): 27 (2001)
    Issue (Month): 4 (March)
    Pages: 460-74

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    Handle: RePEc:ucp:jconrs:v:27:y:2001:i:4:p:460-74

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    Web page: http://www.journals.uchicago.edu/JCR/

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    Cited by:
    1. Johan Almenberg & Artashes Karapetyan, 2010. "Mental accounting in the housing market," Working Paper 2010/20, Norges Bank.
    2. Carbó-Valverde, Santiago & Liñares-Zegarra, José M., 2011. "How effective are rewards programs in promoting payment card usage? Empirical evidence," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3275-3291.
    3. Von Kalckreuth, Ulf & Schmidt, Tobias & Stix, Helmut, 2009. "Choosing and using payment instruments: evidence from German microdata," Working Paper Series 1144, European Central Bank.
    4. Rebecca Ratner & Dilip Soman & Gal Zauberman & Dan Ariely & Ziv Carmon & Punam Keller & B. Kim & Fern Lin & Selin Malkoc & Deborah Small & Klaus Wertenbroch, 2008. "How behavioral decision research can enhance consumer welfare: From freedom of choice to paternalistic intervention," Marketing Letters, Springer, vol. 19(3), pages 383-397, December.
    5. Anja Lambrecht & Katja Seim & Naufel Vilcassim & Amar Cheema & Yuxin Chen & Gregory Crawford & Kartik Hosanagar & Raghuram Iyengar & Oded Koenigsberg & Robin Lee & Eugenio Miravete & Ozge Sahin, 2012. "Price discrimination in service industries," Marketing Letters, Springer, vol. 23(2), pages 423-438, June.
    6. Antonides, Gerrit & Manon de Groot, I. & Fred van Raaij, W., 2011. "Mental budgeting and the management of household finance," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 546-555, August.
    7. Spash, Clive L., 2009. "The Brave New World of Carbon Trading," MPRA Paper 19114, University Library of Munich, Germany.
    8. Von Kalckreuth, Ulf & Schmidt, Tobias & Stix, Helmut, 2011. "Using cash to monitor liquidity - implications for payments, currency demand and withdrawal behavior," Working Paper Series 1385, European Central Bank.
    9. Lo, Hui-Yi & Harvey, Nigel, 2011. "Shopping without pain: Compulsive buying and the effects of credit card availability in Europe and the Far East," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 79-92, February.
    10. Soman, Dilip & Liu, Maggie Wenjing, 2011. "Debiasing or rebiasing? Moderating the illusion of delayed incentives," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 307-316, June.
    11. Luqiong Tong & Yuhuang Zheng & Ping Zhao, 2013. "Is money really the root of all evil? The impact of priming money on consumer choice," Marketing Letters, Springer, vol. 24(2), pages 119-129, June.
    12. Bernadette Kamleitner & Erich Kirchler, 2006. "Personal loan users’ mental integration of payment and consumption," Marketing Letters, Springer, vol. 17(4), pages 281-294, December.
    13. Bernadette Kamleitner & Berna Erki, 2013. "Payment method and perceptions of ownership," Marketing Letters, Springer, vol. 24(1), pages 57-69, March.
    14. Dang Jha Priya, . "A Review of Theoretical Perspectives Applied to Sales Promotion and a New Perspective based on Mental Accounting Theory," IIMA Working Papers WP2004-03-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    15. Promothesh Chatterjee & Randall Rose & Jayati Sinha, 2013. "Why money meanings matter in decisions to donate time and money," Marketing Letters, Springer, vol. 24(2), pages 109-118, June.
    16. Runnemark, Emma & Hedman, Jonas & Xiao, Xiao, 2014. "Do Consumers Pay More Using Debit Cards than Cash? An Experiment," Working Papers 2014:21, Lund University, Department of Economics.
    17. Amy Moore & Michael Taylor, 2011. "Time to Cut Up Those Debit Cards? Effect of Payment Mode on Willingness to Spend," Journal of Consumer Policy, Springer, vol. 34(4), pages 415-422, December.

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