Mental accounting and small windfalls
Subtitle: evidence from an online grocer
By: Katherine L. Milkman, John Beshears
Contributors: Beshears, John; Harvard Business School
Edition: 2nd rev.
Series: Working paper /Harvard Business School -- 08-024; Working paper (Harvard Business School) -- 08-024
Publisher: Harvard Business School
Published: 2008
Place of publication: Boston]
Language: eng
Number of pages: 32
Description: We study the effect of small windfalls on consumer spending decisions by comparing the purchases online grocery customers make when redeeming $10-off coupons with the purchases they make without coupons. Controlling for customer fixed effects and other variables, we find that grocery spending increases by $1.59 when a $10-off coupon is redeemed. The extra spending associated with coupon redemption is focused on groceries that a customer does not typically buy. These results are consistent with the theory of mental accounting but are not consistent with the standard permanent income or lifecycle theory of consumption. While the hypotheses we test are motivated by mental accounting, we also discuss some alternative psychological explanations for our findings.
Notes: "Revised September 2008"--Publisher's web site.

Includes bibliographical references.