Modeling the Heterogeneous Mental Accounting Impacts of Inter-shopping Duration

Abstract

Unlike the principles of traditional economics, namely that goods with monetary equivalency can be substituted, mental accounting states that these goods have different criteria values to consumers depending on the purposes of their use and circumstances at purchase. By modeling an inter-shopping duration that accommodates the mental condition changes captured by a newly formulated latent variable termed “mental loading” herein, our research examines how a consumer’s mental factor affects his or her purchase behavior. From the perspective of behavioral economics, it models consumer purchase behaviors that are seemingly irrational from a traditional economics viewpoint. The model is derived from a threshold-based modeling framework that incorporates consumer heterogeneity in a hierarchical Bayesian manner, and the modeling parameters are estimated by using the Markov Chain Monte Carlo method. By using scanner panel data from a retailer, the empirical results show that our model outperforms those without consumers’ mental condition changes at the time of purchase.