Mental accounting is a psychological phenomenon in which people tend to assign different values and levels of importance to money based on how it is acquired or spent. This can lead to irrational decision-making, such as treating money from one source differently from money from another source, even if the money is identical in value. For example, a person may be more likely to splurge on a luxury item with money they received as a gift, compared to money they earned from working. Mental accounting can influence people’s behavior in various ways, including how they save, spend, and invest their money.
What is Mental accounting In Behavioral Economics?
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BEHAVIORAL SCIENCE GLOSSARY