Psychological Accounting

Explanations > Theories > Psychological Accounting

Description | Research | Example | So What? | See also | References 

Description

When people make decisions, they tend to frame the outcomes of their choices in terms of the direct consequences of the choice.

They also compare things in terms of ratios rather than absolute amounts. For example a gain of $15 vs. a gain of $10 will be viewed more positively than a gain of $150 vs. a gain of $140.

Research

Kahneman and Tversky asked people whether, if they lost a $10 bill when going to see a $10 play, they would still see the play. 88% said they would. However, if they lost the $10 ticket, only 46% would be prepared fork out $10 for another ticket.

Example

When I choose a meal at a restaurant, I am more concerned with how it will taste now than the calories that will attach themselves to my waistline.  

So what?

Using it

Frame choices in terms of consequences.

Defending

Think beyond the immediate consequences of a decision.

See also

Framing

References

Tversky and Kahneman (1981), Quattrone and Tversky (1988)