EconPapers    
Economics at your fingertips  
 

Payment Depreciation: The Behavioral Effects of Temporally Separating Payments from Consumption

John T Gourville and Dilip Soman

Journal of Consumer Research, 1998, vol. 25, issue 2, 160-74

Abstract: Research suggests that individuals mentally track the costs and benefits of a consumer transaction for the purpose of reconciling those costs and benefits on completion of the transaction (Prelec and Loewenstein 1998; Thaler 1980,1985). In transactions where costs precede benefits, this can lead to a systematic and economically irrational attention to sunk costs (Arkes and Blumer 1985; Thaler 1980). In this article, we consider economic exchanges in which costs significantly precede benefits, as with many prepayment types of consumer transactions. We predict a consumer will gradually adapt to a historic cost with the passage of time, thereby decreasing its sunk-cost impact on the consumption of a pending benefit. We label this process of gradual adaptation to costs 'payment depreciation." In a series of experiments, we find evidence of payment depreciation across a range of consumer transactions and offer insight into the behavioral implications of temporally separating costs from benefits. Copyright 1998 by the University of Chicago.

Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (45) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/209533 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jconrs:v:25:y:1998:i:2:p:160-74

Access Statistics for this article

More articles in Journal of Consumer Research from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2022-01-04
Handle: RePEc:oup:jconrs:v:25:y:1998:i:2:p:160-74