Loss is a loss, why categorize it? Mental accounting across cultures

Abstract

Consumers regularly track their expenses and assign them to categories like food, entertainment, and clothing, which is popularly known as mental accounting. In this paper, we show that consumption biases that result from mental accounting—underconsumption or overconsumption—are not prevalent in Easterners due to their holistic thinking style, whereas Westerners exhibit such biases due to their analytic thinking style. In Study 1, we collected data with Easterners (students from the eastern part of India) and show that they do not exhibit mental accounting biases as is seen in Westerners. In Study 2, we show that such differences in mental accounting across cultures result from their thinking styles by manipulating thinking styles within a Western population (American students from the Midwest). We also show that the differences in styles of thinking across cultures motivate two different types of accounting processes—a piecemeal accounting process in the Westerners and a comprehensive accounting process in the Easterners—which in turn influence the differences in mental accounting biases across cultures. This finding adds to the growing literature in cross‐cultural differences in consumer decision making and explores how and why a well‐documented robust effect, mental accounting, varies with the cultural background of the consumers.

Behavioral brittleness: the case for strategic behavioral public policy

“…Many have already recognized BPP's disciplinary limitations, calling attention to cultural and contextual factors in design and implementation (Levinson & Peng, 2006;Banerjee et al, 2019;Soman & Hossain, 2020), the need for a systems approach (Blizzard & Klotz, 2012;Mažar, 2019;, and solutions that adjust to users' emergent needs and behaviors (Broekhuizen et al, 2012;Riley et al, 2015). Even so, for the most part, these approaches still assume the use of traditional problem-solving methodologies and past data as evidence for future states (Howlett, 2020;Sunstein, 2020b), putting them at risk for falling back on old assumptions about what is worth measuring or prioritizing available data over what is most relevant.…”

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“…Social categories might vary in level of abstraction with some individuals making finer distinctions than others (e.g., separating or including "in-laws" with "family"), and vary with regard to the criteria used for grouping relationships (e.g., closeness, kinship, goal instrumentality). Mental accounting tendencies can differ across cultures (Banerjee et al, 2019) and culture might also influence how relational categories are shaped and the tendency to manage social effort across them. In addition to variations in social categories, there might also be different mental accounts that influence how effort is distributed across helping instances: for example, the type of help might matter.…”

Do Koreans like being nudged? Survey evidence for the contextuality of behavioral public policy

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“…Similarly, Wang et al (2017: 278) used Hofstede’s work as a basis of analysis for differences in loss aversion biases across cultures, finding that levels of “individualism, power distance, and masculinity are significantly correlated with loss aversion.” De Vaus et al (2018) discuss how affective disorder in the West is much higher than in Asia, potentially attributable to differences in the way that Asians think about emotion, namely from holistic principles, as opposed to the more analytic West. Finally, Banerjee et al (2019) find that Easterners (who use holistic thinking style) tend to be less susceptible to mental accounting biases versus Westerners (who use analytic thinking style).…”