Mental accounting and Acceptance of a price discount: A case in Vietnam

1. Mental accounting and
acceptance of a price discount
GROUP MEMBER:
- PHAN TỪ NHƯ Ý
- BÙI XUÂN NAM QUÂN
- VŨ THANH PHƯƠNG
- NGUYỄN NGỌC THANH XUÂN

2. Table of content
1.Introduction
2.Literature Review
3.Methodology
4.Result
5.Discussion

3. Introduction
 Based on article: Mental accounting and acceptance of
a price discount - Nicolao Bonini, Rino Rumiati
 According to Tversky and Kahneman (1981), People
show a difference in the rate of acceptance of a price
reduction across the two versions of these
experiments
 The objective of this research is studies the effect of
mental accounting on the acceptance on the price
deduction

4.  Conducted 3 experiments to investigate the effect
 Experiment 1: Provide a baseline to which the results of the
other experiments are compared.
 Experiment 2: A categorical link between the two purchases is
provided.
 Experiment 3: The two purchases are embedded in a shopping
list that includes four products
 Each of the experiments have the sample size about 70
peoples
Introduction

5. LITERATURE REVIEW

6. - “Calculator problem” (cf. Tversky and Kahneman, 1981, p. 457)
- Jacket ($125)[$15]
• Calculator ($15) [$125] ($10) [$120]
- Result: most people (68%) will travel to save the $5 on the cheaper
item but not on the more expensive one (29%).
Trip – 20
minutes
LITERATURE REVIEW

7. Trip – 20
minutes
LITERATURE REVIEW
- Jacket ($125)[$15]
 Calculator ($15) [$125] ($10) [$120]
] Findings
Kahneman and Tversky
(1984)
3 ways to frame results:
Topical account, minimal account,
comprehensive account
 Ready to travel in the ($) version of the
test but not the case in the [$] version
 $5 discount is more important with
respect to $15 and then deserves a travel
to the other branch of the store

8. Trip – 20
minutes
LITERATURE REVIEW
- Jacket ($125)[$15]
 Calculator ($15) [$125] ($10) [$120]
Based on the study of
...
Findings
Thaler [1980,1985] “ people perceive outcomes in terms of a
value function defined over gains and
losses relative to a reference point”
In the case of multiple outcomes, people
code coutcomes to maximize their
happiness (in the shape of the value
function)

9. METHODOLOGY

10. Approach
Minimal Account
 Meaning
Advantage associated with
driving
= price reduction = amount
gained for both cases
 Happens when only one
purchase
Comprehensive Account
 Meaning
Advantage associated with driving
= ending wealth = existing wealth +
(jacket + calculator) - total price
 Happens when price reduction relates
to other expenses, eg, there exist a
planned shopping list
New research  experiment adjustments = strengthen the relation between
purchases

11. Fundamental
Experiment
Categorical Link
Experiment
Shopping List
Experiment
Description replicate Tversky and
Kahneman's (1981)
calculator problem.
We provide a
categorical link between
two purchases
We updgrade the
shopping list to 4
items.
Test the effect of close
relation in accepting a
discount price
the existence of a
comprehensive
account.
Question Is there a difference in
acceptance of a price
reduction between two
versions of the
calculator’s price?
Is there a difference in
acceptance of a price
reduction of a chair in
the ’same category’
condition?
Is there a difference in
acceptance of a price
reduction of a
calculator added in a
shopping list?
How we adjust experiments

12. How WE evaluate the results
 Conduct surveys across 210 IU students for 3
experiments (average 70 respondents/ experiment)
 Collect answers
 Run Chi-square test to determine whether there is any
difference between the observed value and the
expected value across different experiments

13. RESULT

14. EXPERIMENT 1: X2(1) = 15.9, P < 0.0001
Control
Low-price calculator
(70,000 VND)
High-price calculator
(630,000 VND)
Yes
No
Total
28 (80%)
07 (20%)
35
11 (32%)
23 (68%)
34
Symmetric Measures
Value Approx. Sig.
Nominal by Nominal Phi
,481 ,000
Cramer's V
,481 ,000
N of Valid Cases
69
0
5
10
15
20
25
30
Low version High
version
Yes
No

15. Result
 Table results show that the majority of subjects (80%)
accepts the calculator price reduction in the first
version of the problem whereas the minority of
subjects (32%) accepts it in the second version (X2(1)
= 15.9, p < 0.0001).
 There is a strong relationship (Phi and Cramer’s V
value are .481) between the calculator’s price and the
rate of discount acceptance.

16. Experiment 2: X2(1) = 4.87, not significant
Same category condition
Low-price
chair
(70,000 VND)
High-price
chair
(630,000
VND)
Yes
No
Total
24 (71%)
10 (29%)
34
15 (44%)
19 (56%)
34 0
5
10
15
20
25
30
Low version High version
Yes
No

17. Result
 The effect in the previous experiment is not found in
this experiment. The difference in the level of
acceptance reduces from 48% in the first experiment
to 27% in this situation.
 That change in acceptance level could be due to the
manipulation of the ‘categorical link’ designed in this
experiment (a chair and a table)

18. Experiment 3: X2(1) = 0.101, not significant
 The effect in the first experiment disappear totally in this
shopping list experiment (the same result as in the key paper)
Shopping list condition
Low-price
calculator
(70,000 VND)
High-price
calculator
(630,000 VND)
Yes
No
Total
23 (68%)
11 (32%)
34
25 (64%)
14 (36%)
39 0
5
10
15
20
25
30
Low version High version
Yes
No

19. DISCUSSION

20. SURVEY QUESTION
 Choose 3 over 5 experiments to test the problem
 In paper: choose students attending psychology course
in Western University
 In our survey: Form a small group around 60 students
from different majors (finance, business,
biotechnology)
Different mindset.

21. COMPARISON of our result vs paper
 Experiment 1: show the same result which majority of
subjects accepts the calculator price reduction in the
first version, whereas the minority accepts the second
version.
=> The finding show that people tend to use “topical
account” (Kahneman and Tversky 1984) when offered
price reduction.
=> Tend to focus more on planned purchase when facing
2 different categories

22. COMPARISON of our result vs paper
 Experiment 2: show the same result which is majority
of subjects accepts the little price reduction in the first
version of problem
 In paper: the rate of acceptance across 2 version in 2nd
experiment is similar to the previous experiment (18% & 20%)
=> can’t reduce the difference in the rate of acceptance of price
reduction due to weak manipulation of category link between “chair &
little table”
 Our result: the rate of acceptance across 2 version in 2nd
experiment is reduce from 48% to 27% comparing to 1st
experiment but are still high rate
=> The effect in previous experiment disappears.

23. COMPARISON of our result vs paper
 Experiment 3: show the same result, the effect
reported in experiment 1 disappears.
Comprehensive account, using shopping list makes
relationship between products is stronger.
No difference in rate of acceptance of price reduction
across 2 versions

24. SUMMARY
 In calculator problem, tend to accept cheaper
calculator -> using topical account
 When applied planned purchases in shopping list, the
effect in calculator problem disappears. -> using
comprehensive account.
 In general, the paper’s result is proved
 Different environment
 Different mindset
=> Still the same result.

25. THANK YOU