Accounting, Mental

Mental accounting can be thought of as the intersection of behavioral psychology and economics. It is the discipline that examines how people think about money and financial transactions, in an effort to find ways for the thought processes and the operation of financial instruments to be brought into closer alignment with each other, so that people experience more positive outcomes. This field can be a challenging one because its focus is on a system that continually reshapes itself: People’s manner of thinking about money affects the way they use money, but at the same time, the opposite is true—the way people use money affects how they think about it. Ultimately, the reason why social scientists are interested in mental accounting is because it provides insight ...