People who engage in mental accounting are more likely to purchase overpriced warranties.

Question

Quizplus · Accepted Answer

Mental accounting, a concept in behavioral economics, refers to the way individuals categorize, evaluate, and mentally allocate their money. People engaging in mental accounting may not always assess the overall value or cost-effectiveness of a purchase, such as an overpriced warranty, leading them to make decisions that are not financially optimal. They might view the warranty as a separate expense and justify it as a necessary protection, without fully considering its cost relative to the value or likelihood of needing it.

People Who Engage in Mental Accounting Are More Likely to Purchase