Mental accounting, heuristics, and the second‐best: Solving the calculator‐jacket puzzle
This paper conceives mental accounting along Kahneman's “mental economy,” specifically as a heuristic. This mental‐accounting‐as‐heuristic conception allows us to solve the calculator‐jacket puzzle. The opportunity cost of time is not constant but roughly varies with the variation of the item's value. As the value of the item rises, the decision maker (DM) should be more attentive. However, the measurement of the opportunity cost of time at each point of purchase is cognitively costly. To reduce such cost, the DM adopts a heuristic, the item's price itself, as a rough proxy of the varying opportunity cost of time.
Other Information
Published in: Managerial and Decision Economics
License: http://creativecommons.org/licenses/by/4.0/
See article on publisher's website: https://dx.doi.org/10.1002/mde.4135
Funding
Open Access funding provided by the Qatar National Library.
History
Language
- English
Publisher
WileyPublication Year
- 2024
License statement
This Item is licensed under the Creative Commons Attribution 4.0 International License.Institution affiliated with
- Doha Institute for Graduate Studies
- School Of Economics Administration and Public Policy - DI