Salamon, Gábor (Morgan Stanley)
A Dollar and Another: Thoughts about Mental Accounting
A person thinking and acting rationally does not distinguish
between parts of her wealth simply based on their source or intended use.
No matter how we look at it, a dollar is just a dollar. Nevertheless,
research shows, that in this respect, just as on many other fields, practice
produces different answers than the rationality-based theory. We think differently
of a given sum depending on whether we find it as a sudden gain, we earn it as
a monthly salary, or we realize it as an investment profit. We also label
our future spendings for vacation, wedding, pension,
car purchase, living expenses, etc.
This presentation gives some insight about which considerations yield to such a mental accounting, what the costs and benefits of running mental accounts, and at last, but not least, we uncover how this is related to the way we should pack Xmas gifts.
Models we will discuss: Expected Utility Theory and von Neumann--Morgenstern axioms; Prospect Theory, Transactional Utility
Date: Nov. 18, Tuesday 4:15pm
Place: BME, Main Building „K”, 1st Floor, Room 50