Mental accounting mechanisms in energy decision-making and behaviour

Abstract

Mental accounting refers to the fact that people create mental budgets to organize their resource use and to create linkages between specific acts of consumption and specific payments. Research on financial decision-making and consumer behaviour shows that these mechanisms can have a large impact on decisions and behaviours, deviating from normative economic principles. Here we introduce a theoretical framework illustrating how mental accounting mechanisms may influence individual decisions and behaviours driving energy consumption and carbon emissions. We demonstrate the practical relevance of mental accounting in the context of designing carbon pricing mechanisms and discuss the ethical dimensions of applying the concept to intervention design. By bridging the mental accounting literature and research in the energy domain, we aim to stimulate the study of the cognitive mechanisms underlying energy-relevant decisions and the development of novel theory-based interventions targeting reductions of energy use and carbon emissions.

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Fig. 1: Integrated and diversified mental accounting.
Fig. 2: Non-adaptive and adaptive mental budgeting.
Fig. 3: Mental accounting of non-labelled and labelled income.

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Acknowledgements

This research was supported by Swiss National Science Foundation Grant PYAPP1\_160571 and Swiss Federal Office of Energy Grant SI/501108-01. The funding source had no involvement in the preparation of the Perspective. The research is part of the activities of SCCER CREST, which is financially supported by the Swiss Innovation Agency – Innosuisse.

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U.J.J.H., G.C. and T.B. planned and conceptualized the research; B.C. and V.P. provided scientific and practical input; U.J.J.H. wrote the original draft; T.B. contributed to subsequent drafts; all authors reviewed and edited the manuscript, including the final version; T.B. acquired funding for the research.

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Correspondence to Ulf J. J. Hahnel or Tobias Brosch.

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Hahnel, U.J.J., Chatelain, G., Conte, B. et al. Mental accounting mechanisms in energy decision-making and behaviour. Nat Energy (2020). https://doi.org/10.1038/s41560-020-00704-6

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