Double Mental Discounting: When a Single Price Promotion Feels Twice as Nice

Abstract

This research finds that when a single gain has strong associations with multiple costs, consumers often mentally deduct that gain from perceived costs multiple times. For example, with some price promotions (e.g., spend $200 now and receive a $50 gift card to spend in the future), consumers mentally deduct the value of the price promotion from the cost of the first purchase when they receive the promotion, as well as from the cost of the second purchase when they use the promotion. Multiple mental deductions based on a single gain result in consumers' perceptions that their costs are lower than they actually are, which can trigger higher expenditures. This mental accounting phenomenon, referred to as “double mental discounting,” is driven by the extent to which gains feel associated, or coupled, with multiple purchases. This article also documents methods to decouple promotional gains from purchases, thus mitigating double mental discounting.