Expected Value and Consumer Choices

Consumers’ choices are prey to subtle discrepancies that arise in cognitive accounting. Learning how and when you are prey to these discrepancies is an important step in improving your decision making.

As the readings for this module demonstrate, people value gains and losses differently under different scenarios. For example, contestants in a game show might choose a guaranteed $10 prize over a 50 percent chance of winning $20 despite the fact that the expected values are the same.

Using the readings for this module, the Argosy University online library resources, and the Internet, address the following:

• What is mental accounting and how does it impact consumer decision making?
• How might a company take advantage of consumers’ mental accounting? Give examples.
• As a marketer, how might you frame certain decisions to benefit from the disparities that arise in one’s cognitive accounting?
• As a consumer, how would you avoid the pitfalls posed by the inequalities of one’s cognitive accounting?

Write a 3–5-page paper in Word format. Apply APA standards to citation of sources. Use the following file 

Assignment 2 Grading Criteria	Maximum Points
Examined the concept of mental accounting and how it impacts consumer decision making.	20
Adequately described how a company can take advantage of consumers’ mental accounting, providing appropriate examples.	24
As a marketer, explained how certain decisions might be framed to benefit from the disparities that arise in one’s cognitive accounting. As a consumer, explained how to avoid the pitfalls posed by the inequalities of one’s cognitive accounting.	36
Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation.	20
Total:	100

 

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