The construction of mental accounts in benefits decision making.

Mental accounting describes the psychological creation of separate accounts or budgets for categories of decisions. This process simplifies complex budget decisions in ways that significantly affect consumer behavior (Kahneman and Tversky 1981, 1984) and has been incorporated into economic theory (Shefrin and Thaler 1988). The impact of mental accounts on benefits decisions is likely to be significant. The creation of these accounts is context dependent, and prior work has demonstrated that the source and timing of payments affects the allocation of resources into mental accounts. Results from this work demonstrate that other normatively unimportant factors of the choice such as presentation order impact the construction of mental accounts. These results describe mental accounting biases within the context of health care benefits and demonstrate that the construction of mental accounts is highly unstable and easily manipulated within this domain.