Mental accounting and small windfalls
Subtitle: evidence from an online grocer
By: Katherine L. Milkman, John Beshears, Todd Rogers, Max H. Bazerman
Contributors: Beshears, John; Rogers, Todd; Bazerman, Max H.; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 08-024; Working paper (Harvard Business School. Division of Research) -- 08-024
Publisher: Division of Research, Harvard Business School; Harvard Business School
Published: 2007
Place of publication: Boston]
Language: eng
Number of pages: 40
Description: We study the effect of small windfalls on consumer spending decisions by examining the purchasing behavior of a sample of online grocery shoppers over the course of a year. We compare the purchases customers make when redeeming a $10-off coupon they received from their online grocer with the purchases the same customers make when shopping without a coupon. The standard permanent income or lifecycle theory of consumption predicts that grocery spending will be unaffected by the use of a $10-off coupon, while a simple mental accounting framework predicts that such a coupon will increase spending on groceries. Controlling for customer fixed effects and other relevant variables, we find that grocery spending increases by $1.59 with the use of a $10-off coupon.
Notes: "September 2007"--Publisher's web site.

Includes bibliographical references.