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Marketing Letters

, Volume 13, Issue 4, pp 359–372 | Cite as

The Effects of Prior Spending on Future Spending Decisions: The Role of Acquisition Liabilities and Payments

  • Dilip Soman
  • Vivian M. W. Lam
Article

Abstract

Research in mental accounting shows that prior spending influences a consumer's decision to make a new spending decision (Heath and Soll 1996, Soman 2001). In particular, greater spending in a particular category reduces the likelihood of further spending in that category. In the present research, we decompose “spending” into two distinct episodes—the acquisition liability episode during which a purchase is made accompanied by a commitment to pay (e.g., using a credit card) and the payment episode during which the consumer's wealth actually gets depleted (e.g., paying the credit card bill). Using a controlled laboratory experiment and real world data from a group of consumers, we replicate earlier findings that prior spending influences a pending spending decision, but also show that the location of both the acquisition liability episode and the payment episode play a role. Our results contribute to an understanding of the dynamic mental accounting of acquisition liability and actual outflows.

mental accounting dynamic effects budgeting acquisition liability payments consumption 

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Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Dilip Soman
    • 1
  • Vivian M. W. Lam
    • 1
  1. 1.Hong Kong University of Science and TechnologyKowloonHong Kong

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