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Introduction: When people need to take decisions, being economic decisions or otherwise, their decisions tend to rely on information the brain has already processed, and this includes the resources that the person has already invested. This is called sunk cost bias in the behavioural economics literature. On the other hand, mental practices could lead to the mental accounting bias, where people allocate a different value to a fixed amount of money, depending on circumstances.

Purpose: In this chapter, both biases mental accounting and sunk cost are investigated for the tourism industry in Turkey.

Methodology: The topic is researched through scenario-based questions and the Chi-square Automatic Interaction Detector (CHAID) method is applied.

Findings: As a result, it could be reported that people, regardless of gender, fall into sunk cost and mental accounting biases in decisions relating to their vacations. Mental accounting biases can be primarily explained using the scenario questions posed rather than gender, education, and income while sunk cost bias is explained by status, ‘being s university student’ and ‘income level’.

Practical implications: Rapid price changes in the tourism industry can disturb consumers who are mental accounting and sunk cost biased. So, they can change their holiday preferences or be dissatisfied with it and give negative feedback.

We investigate how different cognitive conceptualizations of reference point and tax withholdings jointly influence aggressive tax filing. We utilize a field study with responses captured from actual taxpayers immediately after filing their returns. Consistent with both prospect theory and mental accounting perspectives, we hypothesize and find evidence that more aggressive filing decisions depend on mental categorization of whether taxpayers expect a tax refund or owe additional taxes relative to their expected asset position (EAP). We find a joint and additive impact of EAP with a cognitive link made between taxes and the categorization of amounts owed. Our findings suggest that more aggressive filing behavior is found in taxpayers in a tax loss position relative to their EAP and in those that do not separately categorize taxes owing from their own resources. By highlighting the importance of EAP and the cognitive separation of taxes owed, we provide insight for revenue agencies to use cognitive framing strategies to mitigate aggressive taxpayer behavior. The cognitive framing of EAP may be influenced by the use of installment payments and tax withholdings, but also may be affected by communications that alter taxpayers' expectations of taxes owed.

The purpose of the study is to examine whether public servants as users of accounting information are responsive to changes in the content of an accounting report and, if so, how responsive they are.

The study applies a theoretical framework, linking accounting information and accounting use by focusing on users’ “mental models”. The empirical context for the study is a municipality located in Northwest Russia. Three public servants were followed over several days for the purpose of studying their use of a formal accounting report. Later, those users were also presented with a different version of the same accounting report that was re-constructed by the researcher based on normative accounting theory. The study documents the responses of public servants and presents those in a narrative form.

The study reveals that though the original formal financial accounting report is extensively used, the public servants mostly reject the usefulness of the modified version of the report. The modified accounting report puts public servants in a “discomfort” zone, where the users’ mental models come in conflict with the information in the modified report. Following that, the study uncovers that the use of the traditional accounting report is based on three different mental models developed by users over time and guiding the use of accounting. Those mental models are described by three metaphors: “balanced matrix”, “water tank” and “fair rules”.

There is an unreasonable expectation that change in the public sector accounting system from cash toward accrual information will improve the quality of decision-making by public servants. The claim needs evidence that change in the accounting information supply will actually lead to change in information use. The paper demonstrates that change in use requires more substantial change in the users’ mental models. This change is difficult, time-demanding and requires the development of tailor-made training programs. The paper is also a response to van Helden’s (2016) call for more observational studies that can give a more accurate picture of use.

There was unfinished business to address in the version of the planner–doer model developed in Thaler and Shefrin (1981). The unfinished business involved identifying and modeling the crucial roles played by temptation and mental accounting in pensions and savings behavior. The present paper has two objectives.

The first objective is to describe the key lessons learned in transitioning from the model in Thaler and Shefrin (1981) to the model in Shefrin and Thaler (1988), a transition which addressed some of the unfinished business. The second objective is to describe as yet unfinished business associated with developing a multicommodity, intertemporal version of the planner–doer framework, incorporating the concepts of temptation and mental accounting, to replace the neoclassical theory of the consumer.

Doing so will provide a theoretical foundation for nudges related to household budgeting, spending, saving, borrowing and investing.

This paper presents the first behavioral theory of the consumer, focusing on the manner in which consumers actually make decisions about budgeting, spending. borrowing and saving. The approach in the paper can be viewed as a behavioral counterpart to the neoclassical theory of the consumer. In contrast to the neoclassical approach, which assumes that consumers set and follow utility maximizing budgets, the empirical evidence indicates that only a small minority of consumers describe themselves as setting and following budgets. The behavioral theory presented here focuses on the heuristic nature of consumers' actual budgeting processes and extends the approach described in Thaler and Shefrin's 1981 seminal paper on self-control. The core of the present paper is a working paper which Shefrin and Thaler began in 1980, and as such represents unfinished business from that time. The first part of this paper describes earlier unfinished business from the 1981 framework that the authors subsequently addressed as they developed the behavioral life cycle hypothesis during the 1980s.

How do cognitive aspects influence the use/non-use of accounting information by the politicians? The purpose of this paper is to conceptualize and theorize the readiness to use and the actual use of accounting information in relation to the human and social agency involved.

Applying cognitive fit theory and social cognitive theory, the authors explain how cognition of accounting information producers and users relates to their tasks and their environment. Analyzing cognitive matching, the authors develop accounting information usefulness as a function of the cognitive match between the accounting information producers and users.

The theoretical findings posit that cognitive fit increases with the degree of matching between the cognition of accounting information producers and the cognition of accounting information users. The theory proposes that enriching and matching the various cognitive factors lead to formation of more aligned mental representations to govern the processes of accounting information production and use as a prerequisite for the accounting information usefulness.

By theorizing human cognition, behavior and learning, the authors seek to contribute to the explanation and prediction of accounting information use. Future research needs to empirically validate and/or further develop the propositions.

Practically, the conceptualization can be used to align individual and collective learning on both sides and to introduce information use audit as an instrument for supporting collective learning.

The theory of accounting information usefulness is the first attempt in public sector accounting literature to explain the relation of production and consumption of accounting information in relation to the cognition of the actors involved.

Mental budgeting, as a part of mental accounting theory, is expected to impact a household's budgetary management in terms of expenses. The purpose of this paper is to study whether and how mental budgeting can explain differences in farmers' reactions to different incentives of low-toxicity pesticide use.

Based on data from a survey of 393 vegetable farmers in the Sichuan Province, this analysis, using a Likert Scale approach, first explores whether farmers utilize mental budgeting. Secondly, using a Probit model, this paper analyzes how mental budgeting affects farmers' intentions to switch to low-toxicity pesticide use when faced with different incentives.

The results show that the majority of farmers categorize agricultural inputs into different groups and that 26.46% of the investigated farmers utilize mental budgeting for pest control practices. In addition, farmers who utilizing mental budgeting report a higher willingness to switch to low-toxicity pesticides when they're presented with a specific subsidy. Furthermore, if offered a price premium for quality, the willingness to switch to low-toxicity pesticides for farmers utilizing mentally budget is lower compared to other farmers.

This paper examines the existence of mental budgeting among farmers. It provides a better understanding of how farmers categorize agricultural inputs and their mental mechanisms with respect to agricultural expenses. Finally, this paper is the first to study the effects of mental budgeting on farmers' reactions to different incentives aimed at stimulating the adoption of low-toxicity pesticides.

The purpose of this paper is to test the relationship between the annual income earned by the investors and eight behavioural biases exhibited by the investors such as mental accounting, anchoring, gambler’s fallacy, availability, loss aversion, regret aversion, representativeness and overconfidence.

The relationship is derived based on a questionnaire survey conducted on 436 secondary equity investors residing in Chennai, India.

Analysis of variance test was performed on the normalised and non-normalised version of the biases divided in terms of the annual income earned by the investor. The test found that for the significant biases except the overconfidence bias, the investors with higher annual income were less prone to the biases when compared to investors with lower annual income. On the other hand, with respect to the overconfidence bias, the investors with higher annual income were prone to exhibit overconfidence bias when compared to the investors with lower annual income. Correlation analysis showed that the investors with high annual income were more likely to exhibit higher overconfidence bias but lower representativeness, loss aversion, availability and mental accounting biases.

A contribution in the financial and economic front which would benefit the financial advisors to now consider the income earned by the clients as an important factor while giving financial advice to the clients and while guiding them about the biases they are prone to exhibit.

This paper investigates the transaction decoupling phenomenon in purchase and consumption of football match tickets. The theoretical approach describes several economical constructs behind individual decision-making behaviour, including sunk costs, mental accounting and coupling. Results indicate that people who buy bundled tickets are less likely to use their tickets than those who purchase individual ones. Furthermore, the phenomenon proved to be a valid theory in an actual Brazilian football ticket purchase and consumption scenario, confirming that rational elements can also be part of sports consumption. Thus, it can be stated that the type of purchase (bundle or single tickets) influences consumer decision-making.

The purpose of this paper is to provide insight into the decision process behind whether customers complain, and to identify the effects of the situational factor credence quality in this decision process.

A quasi-experimental design is used in which scenarios are applied in combination with a survey to test and to compare the model and its boundary conditions with existing consumer behavior models.

The mental-accounting process (theory of trying to complain (TTC)) seems to be a stronger predictor than mere attitude models (theory of planned behavior) when trying to explain intention to complain. Second, anticipated justice from complaint handling is a strong driver of intention to complain. Third, in both models, subjective norms are a strong predictor of intention to complain.

This study contributes to both theory and practice by extending existing theory and offering the TTC, and by providing practical insight for service managers.

To the best of the authors’ knowledge, the current study is the first to compare systematically two complaint approaches explaining complaint intention: the attitude model and the mental-accounting model.

Much managerial and behavioural accounting research assumes that people are rational, self‐interested, expected‐utility maximisers. Often, this reduces to the central expectation that individuals are concerned only with their own material self‐interest and are unconcerned with the welfare of others. Here, we consider a preference for achieving fair outcomes in the context of an interdivisional cost and benefit allocation scenario. Consistent with prior research, we reject a simple wealth maximisation hypothesis and find that subjects actively attempt to achieve fair allocations. Interestingly, subjects were willing to adversely affect the outcome of one party to the transaction when they considered themselves to have been treated unfairly by a third party against whom they had no redress. Also, where subjects expected to have their wealth reduced by another party, who freely chose not to do so, these subjects appeared willing to give a lower share of a future windfall gain to them.