Thaler: Mental Accounting and Consumer Choice
Marketing Science 27(1), pp. 15–25, © 2008 INFORMS 25
(1) mentally segregate her earnings from total fam-
(2) direct the extra income toward luxuries; and
(3) increase her control over the spending of the
Another similar example comes from the National
Football League. For years the league had trouble get-
ting players to come to the year-end All-Star game.
Many players would beg off, reporting injuries. A few
years ago the game was switched to Hawaii and a free
trip for the player’s wife or girlfriend was included.
Since then, no-shows have been rare.
Conclusion. This paper has developed new con-
cepts in three distinct areas: coding gains and losses,
evaluating purchases (transaction utility), and bud-
getary rules. In this section I will review the evi-
dence presented for each, describe some research
in progress, and suggest where additional evidence
might be found.
The evidence on the coding of gains and losses
comes from two kinds of sources. The “who is hap-
pier” questions presented here are a rather direct test,
though of a somewhat soft variety. More research
along these lines is under way using slightly differ-
ent questions such as “two events are going to hap-
pen to you, would you rather they occurred on the
same day or two weeks apart?” The two paradigms
do not always lead to the same results, particularly in
the domain of losses (Johnson and Thaler 1985). The
reasons for the differences are interesting and sub-
tle, and need further investigation. The other source
for data on these issues comes from the investigation
of choices under uncertainty. Kahneman and Tversky
originally formulated their value function based on
such choices. In Johnson and Thaler (1985) we inves-
tigate how choices under uncertainty are inﬂuenced
by very recent previous gains or losses. We ﬁnd that
previous gains and losses do inﬂuence subsequent
choices in ways that complicate any interpretation of
the loss function. Some of our data comes from exper-
iments with real money and so are in some sense
“harder” than the who is happier data. Kahneman
and Tversky are also investigating the multi-attribute
extension of prospect theory, and their results suggest
caution in extending the single attribute results.
The evidence presented on transaction utility was
the beer on the beach and hockey ticket question-
naires, and the data on sports pricing. The role of
fairness is obviously quite important in determin-
ing reference prices. A large-scale telephone survey
undertaken by Daniel Kahneman, Jack Knetch and
myself is under way and we hope it will provide
additional evidence on two important issues in this
area. First, what are the determinants of people’s per-
Tax evasion may be another incentive if recipients (illegally) fail
to declare these gifts as income.
ceptions of fairness? Second, how are market prices
inﬂuenced by these perceptions? Evidence on the for-
mer comes directly from the survery research, while
evidence on the latter must come from aggregate eco-
nomic data. The latter evidence is much more difﬁcult
Both the theory and the evidence on the budgetary
processes are less well developed than the other top-
ics presented here. The evidence comes from a small
sample of households that will not support statistical
tests. A more systematic study of household decision
making, perhaps utilizing UPC scanner data, should
be a high priority.
More generally, the theory presented here repre-
sents a hybrid of economics and psychology that has
heretofore seen little attention. I feel that marketing is
the most logical ﬁeld for this combination to be devel-
oped. Aside from those topics just mentioned there
are other extensions that seem promising. On the the-
ory side, adding uncertainty and multiple attributes
are obviously worth pursuing. Regarding empirical
tests, I would personally like to see some ﬁeld exper-
iments which attempt to implement the ideas sug-
gested here in an actual marketing environment.
An earlier version of a portion of this paper was presented
at the Association for Consumer Research conference in San
Francisco, October 1982, and is published in the proceedings
of that meeting. The author wishes to thank Hersh Shefrin,
Daniel Kahneman and Amos Tversky for many useful dis-
cussions. Financial support from the Alfred P. Sloan Foun-
dation is gratefully acknowledged.
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