What are your mental accounts?

Jonah Lehrer says that he (and other people) pay for expensive bowls of cereal and high-speed internet in hotels because of mental accounting.

In the end, expensive hotels are able to charge insane amounts of money for Cheerios and wifi because these exorbitant charges get posted to the mental account of the hotel bill, which will be hundreds of dollars anyways. As a result, the charges don’t seem quite so crazy. (This also helps explain why cheap hotels are so much more likely to offer free internet and breakfast buffets. Sometimes, we get more when we pay less.)

If the exorbitant room rate makes the Cheerios palatable, perhaps sports team owners should raise ticket prices even more than they are accustomed to doing now. After all, the difference between a big city room and a bowl of bran is still larger than the difference between upper deck seats and hot dogs at most ball games.

Sporting events, hotel bills, flights – what are other mental accounts that affect your purchasing decisions?

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  • Williamthegreen

    Bowel of bran? Excellent!

    • http://www.nudges.org/ Nudge blog

      yes!

  • Anonymous

    Actually this is the secret of much of the compensation system in financial services. Since you are always dealing with such large numbers, fees that are large absolute dollar amounts seem small in context.