MENTAL ACCOUNTING AS SELF-REGULATION - RE PRESENTATIVENESS TO GOAL-DERIVED CATEGORIES

When making decisions, people group gains and losses. The way they cho ose to form these groupings, called ''mental accounting'' affects thei r decisions. Mental accounting is a powerful and intuitively compellin g phenomenon. To this point, however, little attention has been devote d to the psychological principles that underlie mental accounting. In this article we explore the psychological processes that set up mental accounts and assign gains or losses to these accounts. We propose tha t (a) currently active goals set up mental accounts, and (b) gains and losses are weighted into these accounts proportionally to their repre sentativeness to the goal that set up the account. We review existing evidence that supports this goals-representativeness view of mental ac counting and describe new studies designed to test these proposals, We also review other choice phenomena (e.g., sunk costs and entrapment) in which mental accounting is involved. We suggest that mental account ing is a useful self-regulatory strategy, despite the fact that it can sometimes lead to irrational choices.