New Money, Old Biases: Understanding Mental Accounting in the Cryptocurrency Era

ABSTRACT Cryptocurrencies are an increasingly popular digital alternative to fiat currencies for consumers to save, invest, and spend. Thus, an important empirical question is how cryptocurrencies impact consumer behavior and financial decisions. Across four studies totaling 2704 participants, we investigate one classical decision‐making bias: mental accounting. Mental accounting is the tendency to categorize money mostly based on subjective factors, rather than objective ones, and it has several cognitive and behavioral consequences. First, our findings show that the classic structural patterns of mental accounting generalize to cryptocurrency contexts, both in evaluative and in behavioral purchase paradigms. Second, although cryptocurrency did not alter these structural patterns, it increased anticipatory consumption guilt and reduced purchase likelihood in consumption contexts. Furthermore, our results indicate that the level of guilt differs between fiat and cryptocurrencies, leading to a reduction in purchasing intentions with the latter. Finally, we tested an intervention which proved effective at reducing mental accounting for cryptocurrency, directly addressing feelings of guilt, besides reducing mental accounting. These results have important implications as businesses turn to cryptocurrency and consider how they should adapt their existing marketing strategies to this new reality.