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The terms mental account and mental accounting were coined in the 1980s by Richard Thaler to refer to certain mental representations (accounts) and cognitive processes (accounting) related to decision outcomes and events, particularly transactions involving money. It is useful to distinguish core mental accounts, which are relatively stable structures, from specific mental accounts constructed to represent a new economic decision.

Core Mental Accounts

Behavioral life cycle theory aims to explain how people deal with the economic transactions they encounter in everyday life across the lifespan. It is a formal economic model incorporating assumptions of bounded rationality theory, notably that people construct simplified mental representations of their economic world. One assumed simplification is that people mentally partition their income and expenditure transactions over time into discrete budget periods, ...

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