Mental accounting is a cognitive bias in behavioral economics whereby individuals mentally partition money into separate, non-fungible "accounts" tied to specific purposes or sources, so that a loss in one account does not equivalently affect decisions involving a different account, even though the monetary value is objectively identical. This behavior violates the classical economic principle of fungibility, which holds that money is interchangeable regardless of its source or designated use, making mental accounting a key example of how real human decision-making departs from rational-agent assumptions in classical economic theory.
Mental accounting is a cognitive bias in behavioral economics whereby individuals mentally partition money into separate, non-fungible "accounts" tied to specific purposes or sources, so that a loss …