Which of the following defines or describes mental accounting?
A) The act of owning a good increases its value, so the owner must be paid more to give up the good than she would have been willing to pay for it in the first place.
B) It is a way to frame a bias in which people treat their current and future assets as separable, nontransferable accounts; for example, having mental savings accounts for entertainment, retirement, and other expenditures.
C) It is the mistake of allowing costs that cannot be recovered to affect decisions.
D) It is the act of placing too much emphasis on the immediate present than even the near future when making decisions.

Question

Quizplus · Accepted Answer

Mental accounting refers to the tendency of individuals to allocate their money into separate accounts based on various subjective criteria, such as the source of the money or its intended use. This can lead to irrational financial decision-making, as people treat money differently depending on which "account" it is in, even though all money is fungible.

Which of the Following Defines or Describes Mental Accounting