Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Breaking your budget? Why consumers overspend on exceptional purchases

20.06.2012
Consumers routinely overspend on unbudgeted purchases such as birthday gifts, car repairs, or luxury chocolates because they underestimate the overall number of such "exceptional" purchases, according to a new study in the Journal of Consumer Research.

"This tendency to underbudget for so-called 'exceptional' purchases occurs because, although each purchase is unusual in isolation, when combined they tend to occur with unexpected frequency," write authors Abigail B. Sussman (Princeton University) and Adam L. Alter (Stern School of Business, New York University).

"People fail to recognize just how many items fall into this exceptional category, so they spend more than they would if they realized how often they were spending on these exceptional purchases."

The authors found that consumers forecasted ordinary expenses accurately but underestimated how much they would spend on exceptional products. Consumers were willing to pay more for exceptional items when presented one at a time than when they were presented all at once. "Consumers tend to treat each exceptional purchase as though it exists in isolation, rather than incorporating it into their budget as one in a series of unique purchases," write the authors.

For example, imagine that one of your favorite bands is performing nearby. The ticket costs more than you would ordinarily spend, but you have never seen this band live and decide the experience is well worth the cost. The following week, your TV breaks and you buy a really expensive replacement since you only buy a new TV once every few years. A week later, you are celebrating your 10th wedding anniversary. Since this is a once-in-a-lifetime event, you decide that the occasion warrants a splurge.

"Failure to aggregate unusual purchases leads consumers to splurge on purchases that they would view more conservatively if they understood these connections. Overall, this tendency results in overspending and under-saving," the authors conclude. "Understanding differences in accounting for ordinary and exceptional expenses can help consumers make wiser budgeting decisions."

Abigail B. Sussman and Adam L. Alter. "The Exception Is the Rule: Underestimating and Overspending on Exceptional Expenses." Journal of Consumer Research: December 2012.

Mary-Ann Twist | EurekAlert!
Further information:
http://www.wisc.edu

More articles from Studies and Analyses:

nachricht First form of therapy for childhood dementia CLN2 developed
25.04.2018 | Universitätsklinikum Hamburg-Eppendorf

nachricht Do microplastics harbour additional risks by colonization with harmful bacteria?
05.04.2018 | Leibniz-Institut für Ostseeforschung Warnemünde

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Why we need erasable MRI scans

New technology could allow an MRI contrast agent to 'blink off,' helping doctors diagnose disease

Magnetic resonance imaging, or MRI, is a widely used medical tool for taking pictures of the insides of our body. One way to make MRI scans easier to read is...

Im Focus: BAM@Hannover Messe: innovative 3D printing method for space flight

At the Hannover Messe 2018, the Bundesanstalt für Materialforschung und-prüfung (BAM) will show how, in the future, astronauts could produce their own tools or spare parts in zero gravity using 3D printing. This will reduce, weight and transport costs for space missions. Visitors can experience the innovative additive manufacturing process live at the fair.

Powder-based additive manufacturing in zero gravity is the name of the project in which a component is produced by applying metallic powder layers and then...

Im Focus: Molecules Brilliantly Illuminated

Physicists at the Laboratory for Attosecond Physics, which is jointly run by Ludwig-Maximilians-Universität and the Max Planck Institute of Quantum Optics, have developed a high-power laser system that generates ultrashort pulses of light covering a large share of the mid-infrared spectrum. The researchers envisage a wide range of applications for the technology – in the early diagnosis of cancer, for instance.

Molecules are the building blocks of life. Like all other organisms, we are made of them. They control our biorhythm, and they can also reflect our state of...

Im Focus: Spider silk key to new bone-fixing composite

University of Connecticut researchers have created a biodegradable composite made of silk fibers that can be used to repair broken load-bearing bones without the complications sometimes presented by other materials.

Repairing major load-bearing bones such as those in the leg can be a long and uncomfortable process.

Im Focus: Writing and deleting magnets with lasers

Study published in the journal ACS Applied Materials & Interfaces is the outcome of an international effort that included teams from Dresden and Berlin in Germany, and the US.

Scientists at the Helmholtz-Zentrum Dresden-Rossendorf (HZDR) together with colleagues from the Helmholtz-Zentrum Berlin (HZB) and the University of Virginia...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Invitation to the upcoming "Current Topics in Bioinformatics: Big Data in Genomics and Medicine"

13.04.2018 | Event News

Unique scope of UV LED technologies and applications presented in Berlin: ICULTA-2018

12.04.2018 | Event News

IWOLIA: A conference bringing together German Industrie 4.0 and French Industrie du Futur

09.04.2018 | Event News

 
Latest News

World's smallest optical implantable biodevice

26.04.2018 | Power and Electrical Engineering

Molecular evolution: How the building blocks of life may form in space

26.04.2018 | Life Sciences

First Li-Fi-product with technology from Fraunhofer HHI launched in Japan

26.04.2018 | Power and Electrical Engineering

VideoLinks
Science & Research
Overview of more VideoLinks >>>