Mental Accounting and Changes in Price: The Frame Dependence of Reference Dependence

Abstract : Mental accounting principles for multiple events were replicated and then extended to pricing situations that were designed to moderate these principles if reference dependence is proportional (i e, if consumers evaluate events in terms of proportional deviations from reference states rather than raw deviations). Prices were stated with or without popular percentage-based pricing frames such as "33% off." Mental accounting principles generally prevailed in the absence of percentage-based frames However, percentage-based frames altered two principles and increased tendencies toward the others. The findings demonstrate that mental accounting principles, price perception, and reference dependence are sensitive to the ways in which deviations from reference states are framed.