Uri Gneezy discusses how mental accounting affects our perception of incentives, making some incentives feel more significant than others.
The Quirks of Mental Accounting:
* Mental accounting dictates that not all expenses are perceived equally.
* Paying for dinner might feel less painful than paying for parking, despite similar costs.
* Our perception of expenses is influenced by various factors, including context and personal significance.
* Understanding what people care about and using it as a currency can make incentives more effective.
Leveraging Mental Accounting for Effective Incentives:
* Gneezy’s collaboration with Edmunds, a car company, exemplifies the power of mental accounting in incentivizing consumer behavior.
* Traditional cash discounts may seem insignificant when compared to the overall cost of a purchase.
* Identifying expenses that people find more painful, such as fueling a car, can lead to more effective incentives.
* Offering $400 for fuel was more effective than offering a $400 discount on a car purchase, as fuel expenses are more painful for people.
Listen to full conversation between Uri & Jasravee Kaur Chandra on Cracking the Code of Incentives – In Marketing, Organizations & Real Life
Uri Gneezy is a Professor of Economics and Strategy and the Epstein/Atkinson Chair in Behavioral Economics, Rady School of Management, University of California, San Diego.
Jagged with Jasravee, the Marketing Show 
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