Mental accounting

People tend to assign subjective value to money - this is susceptible to biases, thinking flaws. Eg. If you find 100$ on the ground, you treat yourself to an expensive dinner - but if you had worked to get that money, you would have saved it.


Mental accounts are believed to act as a self-control strategy. People are presumed to make mental accounts as a way to manage and keep track of their spending and resources.


It has influence on the pain of paying that is associated with spending money from a mental account.Eg., the unpleasant feeling that one experiences when watching the fare increase on a taximeter. Mental accounting plays a powerful role in our decision-making processes.