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Mental Accounting and Consumer Choice

  • Richard H. Thaler

    ()

    (Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853)

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. This article was originally published in , Volume 4, Issue 3, pages 199–214, in 1985.

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File URL: http://dx.doi.org/10.1287/mksc.1070.0330
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Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 27 (2008)
Issue (Month): 1 (01-02)
Pages: 15-25

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Handle: RePEc:inm:ormksc:v:27:y:2008:i:1:p:15-25
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