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What is Mental Accounting and Consumption MPC about?

This paper examines how consumers react to unexpected income shocks, specifically focusing on the marginal propensity to consume (MPC) based on payment modes, shock sizes, and income sources. Findings indicate that consumers exhibit a higher MPC for cash windfalls compared to those deposited in savings accounts, and that the MPC decreases with larger shock sizes. The results align with mental accounting theory, highlighting the influence of behavioral characteristics such as self-control and cognitive sophi

Author

Pratham Luthra

Language

EN