How Cognitive Style Influences the Mental Accounting System: Role of Analytic versus Holistic Thinking

This research examines how people.s mental accounting is influenced by their thinking style (analytic vs. holistic). Mental accounting literature shows that people mentally allocate their resources into certain accounts and track expenses against them. The current research, however, finds that while analytic thinkers show such .mental labeling effect,. the holistic thinkers. mental accounting system is flexible. Specifically, analytic thinkers limit their expenses of rebate money to similar category purchases, whereas holistic thinkers show preference for both similar and dissimilar category items (studies 1 and 2). Study 3 shows the mental accounting divergence across analytic- and holistic-thinking groups by examining how they use mental accounting rules in spending gift cards (vs. cash). Study 4 exhibits the underlying psychological process in showing that this effect is attributed to differences in categorization flexibility between the analytic- and holistic-thinking groups. In addition, the above effects are moderated by product type. The divergence in mental accounting between analytic and holistic thinkers is mostly evident in utilitarian (vs. hedonic) consumption instances. Study 5 provides further insights into the moderation effect. The implications of these findings include divergence in cross-category effects of price promotions, and the effect of cross-market discounts between analytic and holistic thinkers.