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BIAS OF THE WEEK

Mental Accounting

Participants were asked how they would respond to losing two items of equal value, a $10 movie ticket vs. a $10 bill.

A. You lost the ticket!

44% of respondents say they would pay for another

B. You lost a $10 bill!

88% of respondents said they would still purchase a ticket.

Instead of treating all money as having equal value, people tend to manage their spending by dividing funds into mental categories.

See the full study here :

Thaler, R. H. (2016). Misbehaving: The making of behavioral economics. WW Norton & Company.