Mental accounting

Mental accounting is the phenomenon that people do not treat money as one neutral pool but sort it into mental jars, each with its own rules. Holiday pay is spent more easily than salary, a bonus feels different from savings, and saving ten euros on a small purchase feels bigger than on a large one. Related is the pain of paying: handing over cash hurts more than a subscription that quietly renews. For pricing strategy this is fundamental: how a price is framed, split, bundled or timed changes the experience of the same economic transaction. Pricing is therefore psychology at least as much as arithmetic.

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