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The Exception Is the Rule: Underestimating and Overspending on Exceptional Expenses

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  • Abigail B. Sussman
  • Adam L. Alter

Abstract

Purchases fall along a continuum from ordinary (common or frequent) to exceptional (unusual or infrequent), with many of the largest expenses (e.g., electronics, celebrations) being the most exceptional. Across seven studies, we show that, while people are fairly adept at budgeting and predicting how much they will spend on ordinary items, they both underestimate their spending on exceptional purchases overall and overspend on each individual purchase. Based on the principles of mental accounting and choice bracketing, we show that this discrepancy arises in part because consumers categorize exceptional expenses too narrowly, construing each as a unique occurrence and consequently overspending across a series of discretely exceptional expenses. We conclude by proposing an intervention that diminishes this tendency by helping consumers consider their spending on exceptional items as part of a larger set of purchases.

Suggested Citation

  • Abigail B. Sussman & Adam L. Alter, 2012. "The Exception Is the Rule: Underestimating and Overspending on Exceptional Expenses," Journal of Consumer Research, Oxford University Press, vol. 39(4), pages 800-814.
  • Handle: RePEc:oup:jconrs:doi:10.1086/665833
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    File URL: http://dx.doi.org/10.1086/665833
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    File URL: http://dx.doi.org/10.1086/665833
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    Citations

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    Cited by:

    1. Dean Karlan & Margaret McConnell & Sendhil Mullainathan & Jonathan Zinman, 2016. "Getting to the Top of Mind: How Reminders Increase Saving," Management Science, INFORMS, vol. 62(12), pages 3393-3411, December.
    2. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
    3. repec:spr:jbecon:v:87:y:2017:i:6:d:10.1007_s11573-016-0839-z is not listed on IDEAS
    4. repec:spr:jhappi:v:18:y:2017:i:3:d:10.1007_s10902-016-9758-5 is not listed on IDEAS
    5. Jonathan Zinman, 2014. "Consumer Credit: Too Much or Too Little (or Just Right)?," The Journal of Legal Studies, University of Chicago Press, vol. 43(S2), pages 209-237.
    6. Johanna Peetz & Melanie Simmons & Jingwen Chen & Roger Buehler, 2016. "Predictions on the go: Prevalence of spontaneous spending predictions," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 11(1), pages 48-61, January.
    7. repec:kap:mktlet:v:29:y:2018:i:1:d:10.1007_s11002-017-9445-2 is not listed on IDEAS
    8. Dean Karlan, Aishwarya Lakshmi Ratan, Jonathan Zinman, 2013. "Savings by and for the Poor: A Research Review and Agenda-Working Paper 346," Working Papers 346, Center for Global Development.

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