BIAS OF THE WEEK

Mental Accounting

Imagine you went to see a movie and the admission was $10 per ticket. As you enter the theater you discover…

  • Scenario A: You lost the ticket! Would you pay for another? 46% of repondents said yes. 
  • Scenario B: You lost a $10 bill! Would you pay for a ticket? 88% of respondents said yes. 

What gives ? You lost the same amount in each scenario.

We dont’t view the money we spend as having equal value but assign subjective criteria to categorize our spending. This often leads to irrational financial decisions and investments. 

See the full study here :

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

Want to know more about biases?

Social Desirability Bias

Cashless Effect

Choice Overload

Ikea Effect