Mental accounting impacts how people make financial decisions from "summary" of Misbehaving by Richard H Thaler
Mental accounting refers to the ways in which people categorize and treat money differently based on various psychological factors. This concept has a significant impact on how individuals make financial decisions, often leading to irrational behaviors that deviate from traditional economic theory. People tend to mentally separate their money into different "accounts" based on factors such as the source of the funds or the intended use. This segmentation can lead to suboptimal decision-making, as individuals may prioritize certain accounts over others without con...
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