Mentally Accounting for Restricted Funds: How Gift Cards Change Preferences

Nicholas ReinholtzColumbia University
Daniel BartelsUniversity of Chicago
Jeffrey ParkerGeorgia State University

Abstract

Gift cards are a common form of restricted funds: The balance of a closed-loop (brand-specific) gift card can only be redeemed at the originating brand. We propose that this restriction compels the recipient of a gift card to consider how the funds can be spent, which leads to the formation of a brand-specific spending goal and corresponding mental account. Because purchases more representative of the retailer will be more strongly associated with the spending goal and mental account, we predict that individuals shopping with retailer-specific gift cards have an increased preference for products typical of the retailer.

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Mentally Accounting for Restricted Funds: How Gift Cards Change Preferences (160 KB)



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