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In this article, the authors discuss an aspect of feelings in mental accounting that previous research has not yet considered. They present “emotional accounting,” a variant of mental accounting in which money is categorized based on the feeling it evokes, and posit that the valence and intensity of these feelings may exert a substantial influence on recipients’ spending behaviors. Specifically, the authors argue that the emotional response to the receipt of a sum of money can become associated with the money itself in the form of an “affective tag.” In effect, they suggest that in the same way that money is categorized by its source in mental accounting, it can also be categorized by the feeling it evokes. For example, consider, a sum of money obtained in a contentious life insurance settlement. It is easy to imagine that the money itself will be negatively tagged as “unhappy money” because of its association with the passing of someone and the pain of battling the insurance company. The authors argue that these negative feelings about the money will bear on its use.

In particular, the authors investigate cases in which people receive unanticipated sums of money, or windfalls, under negative circumstances. The findings indicate that the negative component of these windfalls’ affective tag augments the preference for virtuous or utilitarian goods over hedonic goods because the former are perceived as effective means to reduce the negative feelings associated with the money.

In a representative experiment, participants in a lab were surprised with $2 for completing an unrelated task. Half the participants were told that the money came from a grant donated by a leading computer manufacturer. The other half were told that the money came from a grant donated by a leading cigarette manufacturer. Participants in the cigarette condition were twice as likely to make a virtuous purchase with their money (discount coupons for textbooks in the bookstore) than a hedonic purchase (discount coupons for ice cream at a local parlor) compared with participants in the computer condition.

Biography
Jonathan Levav is the Class of 1967 Associate Professor in the Columbia Business School at Columbia University. He received his PhD in Marketing from the Fuqua School of Business at Duke University. His research focuses on judgment and decision making, variety seeking, sequential decisions, and preference prediction.

Peter McGraw is Assistant Professor of Marketing in the Leeds School of Business at the University of Colorado, Boulder. He received his PhD in Psychology from The Ohio State University and was a Postdoctoral Fellow at Princeton University’s Woodrow Wilson School of Public Policy. His research primarily examines the emotional causes and consequences of judgment and choice. In addition, he studies morally motivated consumer choice, and he investigates the structure of emotion by examining the precipitating factors and consequences of mixed feelings.

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