Managing Mental Accounts: Payment Cards and Consumption Expenditures / Michael Gelman, Nikolai Roussanov.

Format:

Book

Author/Creator:

Gelman, Michael.

Contributor:

National Bureau of Economic Research.

Roussanov, Nikolai.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31613.

NBER working paper series no. w31613

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Does mental accounting matter for total consumption expenditures? We exploit a unique setting in which individuals exogenously received a new credit card, without requesting one. Using random variation in the time of receipt we show that individuals temporarily increase total consumption expenditure by making purchases with the new card without reducing spending on the others. We do not observe a corresponding increase in indebtedness. Total consumption expenditure rises even for the least liquidity-constrained individuals. The evidence is consistent with consumers treating methods of payment as nonfungible budget categories, as suggested by models of mental accounting and narrow bracketing.

Notes:

Print version record

August 2023.