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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. 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.
    3. von Kalckreuth, Ulf & Schmidt, Tobias & Stix, Helmut, 2011. "Using cash to monitor liquidity: Implications for payments, currency demand and withdrawal behavior," Discussion Paper Series 1: Economic Studies 2011,22, Deutsche Bundesbank, Research Centre.
    4. 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.
    5. Ulf von Kalckreuth & Tobias Schmidt & Helmut Stix, 2009. "Choosing and using payment instruments: evidence from German microdata," Working Paper Series 1144, European Central Bank.
    6. Spash, Clive L., 2009. "The Brave New World of Carbon Trading," MPRA Paper 19114, University Library of Munich, Germany.
    7. 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.
    8. Bernadette Kamleitner & Erich Kirchler, 2006. "Personal loan users’ mental integration of payment and consumption," Marketing Letters, Springer, vol. 17(4), pages 281-294, December.
    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. 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.
    11. 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.

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