Journal of Marketing ResearchVol. XLVI (February 2009), 66–8066© 2009, American Marketing AssociationISSN: 0022-2437 (print), 1547-7193 (electronic)*Jonathan Levav is Class of 1967 Associate Professor of Business,Columbia Business School, Columbia University (e-mail: [email protected]). A. Peter McGraw is Assistant Professor of Marketing,Leeds School of Business, University of Colorado (e-mail: [email protected]). They thank On Amir, Dan Ariely and his doctoralseminar students, Jim Bettman, Gita Johar, Eric Johnson, Jeff Larsen, JohnLynch, Michel Pham, Anastasiya Pochepstova, Janet Schwartz, RebeccaRatner, Bill Von Hippel, participants at various marketing seminars atwhich this work was presented, and especially the JMR review team forhelpful comments and suggestions. They also thank Rebecca Canate, MattLambuth, and Sarah Molouki for their research assistance. The authorscontributed equally to this work; order of authorship is alphabetical. DilipSoman served as associate editor for this article.JONATHAN LEVAV and A. PETER MCGRAW*Mental accounting posits that people track their expenditures usingcognitive categories or “mental accounts.” The authors propose that thiscognitive process can be complemented by an approach that examineshow feelings about a sum of money, or the money’s “affective tag,”influence its consumption. When people receive money under negativecircumstances, this tag can include a negative affect component, whichpeople aim to reduce by engaging in strategic consumption. The authorsinvestigate two such strategies, laundering and hedonic avoidance, anddemonstrate their effect on consumption of windfalls. The authors findthat people avoid spending their negatively tagged money on hedonicexpenditures and prefer to make utilitarian or virtuous expenditures toreduce, or “launder,” their negative feelings about the windfall. Theauthors call this tagging process and strategic consumption “emotionalaccounting.”Keywords: emotional accounting, mental accounting, consumerspending, windfalls, behavioral decision theoryEmotional Accounting: How Feelings AboutMoney Influence Consumer ChoiceAlthough mental accounting research suggests that finan-cial windfalls are spent more readily and frivolously thanordinary income, windfalls are sometimes spent reluctantlyor virtuously—a consumption pattern that mental account-ing does not predict. We introduce and test the related con-cept of “emotional accounting,” in which money is labeledby the feeling it evokes; in turn, this emotional label influ-ences how the money is spent. We show that when the feel-ings evoked by a windfall are negative, consumers engagein strategic consumption to cope with the negativity. In par-ticular, they avoid hedonic purchases so as not to exacer-bate their negative feelings, and when possible, theyattempt to use the money for relatively virtuous or utilitar-ian expenditures to alleviate or “launder” their negativefeelings about the money. By incorporating consumers’feelings about a sum of money into mental accounting, weexplain behaviors that deviate from previously documentedpurchase patterns.MENTAL ACCOUNTINGMental accounting proposes that consumers track andevaluate their financial activities using a set of cognitivelabels or “mental accounts,” each of which is associatedwith a different marginal propensity to consume (Heath andSoll 1996; Henderson and Peterson 1992; Kahneman andTversky 1984; Thaler 1985, 1990). Mental accounting hasbeen invoked as an explanation for a wide range of con-sumption and spending behaviors, including savings (She-frin and Thaler 1992), borrowing and debt (Hirst, Joyce,and Schadewald 1994; Prelec and Loewenstein 1998),spending of tax rebates (Epley, Mak, and Idson 2006), theeffects of payment on consumption over time (Gourvilleand Soman 1998), windfall spending (Arkes et al. 1994),and many others (for a comprehensive discussion, seeThaler 1999).Consumers typically track their financial activities bylabeling their money according to the context in which itwas obtained. In a variant of mental accounting called“income accounting,” labels are determined by the money’ssource, and the money is spent in a way that “matches” thatsource (McGraw, Tetlock, and Kristel 2003; O’Curry 1997;Thaler 1999; see also Belk and Wallendorf 1990). ForEmotional Accounting 67example, money won in a football betting pool might beused for dining at a restaurant, but a tax refund is morelikely to be used for paying bills (O’Curry 1997).Mental accounting research has also investigated some ofthe ways that feelings influence consumer spending. In par-ticular, the explicit treatment of feelings in mental account-ing focuses on people’s preference to mentally couple gainsand losses or payment and consumption. For example,Linville and Fischer (1991) find that people prefer toexperience financial losses on different days of the weekbecause simultaneously occurring losses can overwhelmtheir capacity to cope. Prelec and Loewenstein (1998) showthat consumers manage their feelings by temporally decou-pling payment from consumption because the pain of pay-ing for a product dampens the pleasure they derive from itsconsumption.EMOTIONAL ACCOUNTINGIn this article, we discuss an aspect of feelings in mentalaccounting that previous research has not yet considered.We present “emotional accounting,” a variant of mentalaccounting that categorizes money on the basis of the feel-ing it evokes, and we posit that the valence and intensity ofthese feelings may exert a substantial influence on recipi-ents’ spending behaviors. Specifically, we argue that theemotional response to the receipt of a sum of money canbecome associated with the money itself in the form of an“affective tag.” In effect, we suggest that in the same waythat money is categorized by its source in mental account-ing, it can also be categorized by the feeling it evokes (justas feelings are evoked by categories in schema-triggeredaffect; see Fiske 1982; Smith and Ellsworth 1985). Forexample, consider a sum of money obtained in a con-tentious life insurance settlement. It is easy to imagine thatthe money itself would be negatively tagged as “unhappymoney” because of its association with the passing ofsomeone and the pain of battling the insurance company.We argue that these negative feelings about the money willinfluence its use.Why should feelings about money play a role in how it