THE PRICE OF PERCEPTION: MENTAL ACCOUNTING AND MARKET-LEVEL IMPACTS IN RETAIL
DOI:
https://doi.org/10.60101/gbafr.2026.279948Keywords:
Mental accounting, Reference point, Risk aversion, Supply chainAbstract
Purpose – This paper examines the effects of mental accounting bias on decision-making within supply chains, focusing on suppliers, retailers, and end consumers. It investigates how mental accounting influences ordering behavior, pricing decisions, and interactions among supply chain participants, and explores the resulting market-level implications.
Body of knowledge – A narrative literature review was conducted to synthesize prior research on mental accounting in supply chain contexts. The analysis classified the evidence into three categories: reference point effects, risk aversion effects, and payment scheme effects. The reviewed studies indicate that mental accounting can lead retailers and consumers to deviate from optimal decision-making, particularly in online purchasing environments, inventory ordering, contract selection, and pricing behavior. The findings also highlight how behavioral biases propagate through supply chain relationships, creating ripple effects that influence overall supply chain performance.
Implications – The findings suggest that mental accounting may contribute to suboptimal inventory decisions, altered pricing strategies, and reduced profitability across supply chain actors. Retailers may order quantities that differ from optimal levels due to reference-dependent judgments and risk considerations, while payment schemes and digital purchasing channels may encourage increased spending and ordering behavior. These behavioral distortions can affect supply chain coordination and potentially influence market prices and aggregate supply.
Originality/Value – This study integrates evidence from behavioral economics and supply chain management to provide a structured classification of mental accounting effects within supply chains. By conceptualizing these effects as cognitive disruptions and examining their interconnected impacts on suppliers, retailers, and consumers, the paper offers a broader perspective on how behavioral biases influence supply chain outcomes and market dynamics.
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