The Role of Mental Accounting in Household Spending and Investing Decisions

Forthcoming in C. Chaffin (Ed.), Client Psychology. New York: Wiley

Chicago Booth Research Paper No. 19-07

31 Pages Posted: 12 Oct 2017 Last revised: 10 Feb 2019

See all articles by C. Yiwei Zhang

C. Yiwei Zhang

University of Wisconsin - Madison

Abigail B. Sussman

University of Chicago - Booth School of Business

Date Written: December 4, 2017

Abstract

This chapter reviews recent advances in the literature on mental accounting - the process by which people group expenses into categories, assign funds to these categories, determine budgets, and perform elements of cost-benefit analyses. We focus in particular on mental accounting within the context of consumer financial decision-making and highlight some of the notable work in this growing area that examines how mental accounting influences budgeting, spending, and investment decisions. The chapter concludes by suggesting several promising avenues for future work.

Keywords: mental accounting, consumer finance, financial decision-making

Suggested Citation

Zhang, C. Yiwei and Sussman, Abigail B., The Role of Mental Accounting in Household Spending and Investing Decisions (December 4, 2017). Forthcoming in C. Chaffin (Ed.), Client Psychology. New York: Wiley, Chicago Booth Research Paper No. 19-07, Available at SSRN: https://ssrn.com/abstract=3051415

C. Yiwei Zhang (Contact Author)

University of Wisconsin - Madison ( email )

HOME PAGE: http://www.yiwei-zhang.com

Abigail B. Sussman

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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