Mental Accounting Examples

The Washington Post has an article explaining Thaler's Mental Accounting in the context of everyday life. When people make a mental account of how much a product or service is going to cost and have spent that amount, then any event that causes them to exceed that budget is viewed disapprovingly.

Mental accounting is really the household equivalent of financial accounting, said Richard Thaler, an economist at the University of Chicago who was the first to describe how the phenomenon works. Just as an office expense-account maven might tell you that your budget for lunch is no more than $25, you make projections on how much you will spend using your own money. This mostly ends up saving you time. You don't have to think twice (although maybe you should) about the $3 latte you get each morning because you have a mental account that says you are entitled to a $3 latte each day.