Evaluating and budgeting with instalment credit: An interview study

Ranyard, Rob; Craig, Gill

doi:10.1016/0167-4870(95)00020-o

Cited by 39 publications

(45 citation statements)

References 15 publications

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“…Time discounting refers to diVerences in the evaluation of future assets and outcomes compared to equivalent ones in the present (for a review see Loewenstein & O'Donoghue, 2002). Ranyard and Craig (1995) argued that in the context of instalment credit, time discounting would depend on how credit options were mentally represented. Their dual mental account model proposed that people may construe instalment credit in terms of two possible representations, the total account and the recurrent budget period account.…”

Section: A Mental Accounting Perspectivementioning

confidence: 99%

The role of mental accounting in consumer credit decision processes

Ranyard

Hinkley

Williamson

et al. 2006

Journal of Economic Psychology

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Section: A Mental Accounting Perspectivementioning

confidence: 99%

The role of mental accounting in consumer credit decision processes

Ranyard

Hinkley

Williamson

et al. 2006

Journal of Economic Psychology

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“…An exception is Ranyard and Craig's (1995) study on mental accounting of consumer credit decisions. They argue that mental accounts, as specific mental representations, influence financial performance and money management.…”

Section: Linking Mental Accounting With Money Managementmentioning

confidence: 97%

“…This paper aims to investigate whether indebted people's own narratives of their mental and factual money management practices and the associated experiences of willpower requirements support the suggested model. An in-depth interview study (for previous studies investigating mental accounting through interviews see, for example, Kamleitner & Kirchler, 2006;Ranyard & Craig, 1995) combined with a questionnaire was used to identify whether the components of our model (i.e., actual money management practices, mental accounting structures, the degree of congruency between them, and experienced willpower requirements) actually seem to play a role in preventing and fighting problem debt.…”

Section: A Model Of Over-indebtednessmentioning

confidence: 99%

Over-indebtedness and the interplay of factual and mental money management: An interview study

Kamleitner

Hornung²,

Kirchler

2011

New Zealand Economic Papers

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Previous research has shown that money management contributes to over-indebtedness. This article sheds new light on this relation by looking at factual money management and its mental underpinnings, mental accounting. In a conceptual model we propose that fuzzy factual and mental money management practices aggravated by lack of congruency between factual and mental structures play an important role in over-indebtedness. Twenty-five in-depth interviews deliver preliminary support for this proposition. Successful financial control seems to build on efficient and inter-coordinated factual and mental money management. This reduces the willpower necessary for controlling financial behavior and helps to prevent and fight over-indebtedness.debt, money management, mental accounting, self-control,

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“…Participants faced choices in four sequence domains: one-year salary earnings, one-year 2 Previous verbal protocol analyses of economic choice have been reported by Ranyard and Craig (1995) and Schkade and Payne (1993 lottery winnings, lifetime earnings, and lifetime health (described later). 3 The sequences were chosen to represent a range of theoretically important situations and to elicit diverse reasoning processes.…”

Section: Materials: Money Sequencesmentioning

confidence: 99%

Reasons for sequence preferences

Read

Powell

2002

Behavioral Decision Making

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Much research shows that when it comes to preferences over sequences of money, such as a monthly paycheck, people do not always maximize present value. Rather, they often choose the lower-valued of a pair of sequences, especially when it has attractive properties such as an increasing trend. To unearth the reasons for sequence preferences we conducted a verbal-protocol analysis of choices between money sequences, including lifetime and one-year earnings and one-year lottery winnings, as well as lifetime health sequences. Participants thought aloud while choosing between visual representations of sequences. Their verbalizations contained reference to a wide range of previously hypothesized, as well as new, reasons for choice. These reasons were also correlated in sensible ways with the choices made. There was some evidence of solid economic reasoning (which we called maximization), although this was largely restricted to choices for one-year earnings. More commonly, respondents did not distinguish between earnings and consumption, and thought about money as if they would automatically spend it at the rate it was received. This meant the most frequently given reason was what we called appropriateness-how well the money received at a given point matched the desired consumption at that point. Other common explanations include the expectedness of a sequence (we argue this is mediated by appropriateness), the way that parts of the sequence constitute reference points for other parts, and the ease with which incoming money can be managed (convenience). Copyright # 2002 John Wiley & Sons, Ltd. key words intertemporal choice; sequences; rationality; economic psychology; verbal protocolsGiven a choice between two ways of distributing a fixed amount of money over time, either as a falling sequence going from large payments to small, or a rising sequence going from small to large, a rational decision maker will choose the falling sequence. This is because at any non-zero rate of interest the falling sequence dominates the rising one, since any unspent money can earn interest. Despite this, there is evidence that people often prefer rising to falling sequences Chapman, 1996;Frank, 1992;Gigliotti & Sopher, 1997;Loewenstein & Sicherman, 1991;Matsumoto, Peecher, & Rich, 2000 1999). One real-world consequence of this is that workers demand rising wages (after inflation) even when their productivity is not rising, leading them to be underpaid early and overpaid late in their careers (Frank & Hutchens, 1993;Neumark, 1995). Loewenstein and Sicherman (1991) reported the first experimental demonstration of the preference for rising over falling sequences of money. Their participants ranked money sequences, and also chose between a single rising and falling one. For both tasks, the great majority chose rising over falling sequences. Several replications of this study, using slightly different materials, have found much the same pattern (Gigliotti & Sopher, 1997;Matsumoto et al., 2000;Susianto, 1999).Although the modal prefer...

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Evaluating and budgeting with instalment credit: An interview study

Cited by 39 publications

References 15 publications

The role of mental accounting in consumer credit decision processes

The role of mental accounting in consumer credit decision processes

Over-indebtedness and the interplay of factual and mental money management: An interview study

Reasons for sequence preferences

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