The study found that consumers experiencing social exclusion are more likely to make high risk investments. This effect is moderated by consumers' level of mental budgeting such that at high levels of mental budgeting the effect of social exclusion on investment choice is attenuated. The study further finds that the moderating effect of mental budgeting is mediated by pain of payment.The findings suggest that policymakers can reduce unduly risky personal investment behavior by triggering mental budgeting thoughts using methods such as advertising and mention of transaction fees.

Summary

<ul><li>a state of physical/emotional isolation involving feelings of loneliness due to being left out, ignored or ostracised by others</li><li>leads to anti-social behaviour</li></ul>influences:<ul><li>preference for distinctive products: psychological emptiness/ unsatisfactory interpersonal relationships intensify the desire for material possessions and conspicuous consumption</li><li>risk-taking behaviour: present-day bias, less conservative investment behaviour</li><li>inclination towards brand/ product switching (self-efficacy, sense of control)</li></ul> <ul><li>financial literacy is lower in developing countries; lowest w.r.t. risk diversification</li></ul>

Social exclusion

<ul><li>incl. mental budgeting (separation of monetary income into economic categories), labelling of income and assets, hedonic framing (evaluation of gains and loss combinations)</li><li>violates the fungibility assumption of money: different propensities to use money depending on the source</li><li>hampered by credit card use: decouples costs and benefits by facilitating mixing of purchases among budgeted categories and increasing temporal distance between purchases and payments (payment delayed until credit card bill is due)</li></ul>

Mental Accounting 

<ul><li>prospect theory: loss perception decreased in consumers in a low state of mental budgeting</li><li>psychological myopia: tendency to focus on immediately relevant information (e.g., transaction fees) while ignoring relevant background information stronger for high levels of mental budgeting ➡️ lower probability of engaging in high-risk investments</li></ul>

Mental Accounting II

<ul><li>painful state of mind or psychological burden consumers experience upon purchase</li><li>lowered by credit card and mobile payments</li><li>bottom dollar effect: purchases using budgets close to exhaustion result in a lower customer satisfaction</li><li>higher level of mental budgeting results in stronger pain of payment</li></ul>

Pain Of Payment

H1: Socially excluded people have a higher preference for high-risk investment products than socially included people. H2: For individuals with higher mental budgeting, the positive effect of social exclusion on preference for high-risk investment products will be lower. H3: The moderating effect of mental budgeting on the impact of social exclusion on consumer preference for high risk investment is mediated by pain of payment.

Hypotheses

<abbr title="International Standard Serial Number." dir="ltr">ISSN</abbr>:
 0265-2323
 
 
 
 Article publication date: 5 May 2021

 <img src="https://www.emerald.com/insight/static/img/rightsLink.png" alt="Reprints &amp; Permissions" width="126" height="15">
 Issue publication date: 6 July 2021
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 </div><h2>Abstract</h2><h3>Purpose</h3>Consumers who experience social exclusion often prefer high-risk financial products over low-risk financial products. The aim of this study is to examine how this effect can be attenuated by applying the theories of mental budgeting and pain of payment. The authors’ aim in pursuing this research is to improve the effectiveness of financial professionals and others in educating consumers on healthy financial practices. Understanding how social exclusion experiences influence financial decision-making is essential for continued progress in consumer financial education.<h3>Design/methodology/approach</h3>The authors examine the effect of consumers experiencing social exclusion on preference for high-risk financial products using an experimental design involving the manipulation of social exclusion/inclusion experiences. Data were collected from 148 consumers of mutual fund investment services via Amazon Mechanical Turk.<h3>Findings</h3>The study found that consumers experiencing social exclusion are more likely to make high risk investments. It also found that this effect is moderated by consumers' level of mental budgeting such that at high levels of mental budgeting the effect of social exclusion on investment choice is attenuated. The study further finds that the moderating effect of mental budgeting is mediated by pain of payment.<h3>Social implications</h3>The findings of this study suggest that policymakers can reduce unduly risky personal investment behavior by triggering mental budgeting thoughts using methods such as advertising and explicit mention of transaction fees.<h3>Originality/value</h3>The present study builds on existing research demonstrating the adverse behavioral consequences of social exclusion but refines our understanding by demonstrating the attenuating effect of mental budgeting and the mediating effect of pain of payment on high risk financial purchases.

The effects of mental budgeting and pain of payment on the financial decision making of socially excluded people - Author: Sungyong Chun, Devon S. Johnson

Bank Marketing

<abbr>ISSN </abbr>: 0265-2323

Article publication date: 5 May 2021

Issue publication date: 6 July 2021

Consumers who experience social exclusion often prefer high-risk financial products over low-risk financial products. The aim of this study is to examine how this effect can be attenuated by applying the theories of mental budgeting and pain of payment. The authors’ aim in pursuing this research is to improve the effectiveness of financial professionals and others in educating consumers on healthy financial practices. Understanding how social exclusion experiences influence financial decision-making is essential for continued progress in consumer financial education.

The authors examine the effect of consumers experiencing social exclusion on preference for high-risk financial products using an experimental design involving the manipulation of social exclusion/inclusion experiences. Data were collected from 148 consumers of mutual fund investment services via Amazon Mechanical Turk.

The study found that consumers experiencing social exclusion are more likely to make high risk investments. It also found that this effect is moderated by consumers' level of mental budgeting such that at high levels of mental budgeting the effect of social exclusion on investment choice is attenuated. The study further finds that the moderating effect of mental budgeting is mediated by pain of payment.

The findings of this study suggest that policymakers can reduce unduly risky personal investment behavior by triggering mental budgeting thoughts using methods such as advertising and explicit mention of transaction fees.

The present study builds on existing research demonstrating the adverse behavioral consequences of social exclusion but refines our understanding by demonstrating the attenuating effect of mental budgeting and the mediating effect of pain of payment on high risk financial purchases.

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The effects of mental budgeting and pain of payment on the financial decision making of socially excluded people

Summary

Social exclusion

Mental Accounting

Mental Accounting II

Pain Of Payment

Hypotheses

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The effects of mental budgeting and pain of payment on the financial decision making of socially excluded people

Summary

Social exclusion

Mental Accounting

Mental Accounting II

Pain Of Payment

Hypotheses

IDEAS ABOUT

MORE LIKE THIS

Sugar Detox: Symptoms, Withdrawal Side Effects, and How to Manage Them

Six financial personality types - which one are you?

Risk: Seeing around the corners

It's time to

READ

LIKE

A PRO!

Bite-sized knowledge
to upgrade
your career