Promotion and Prevention Across Mental Accounts: When Financial Products Dictate Consumers' Investment Goals

Abstract

We propose that consumers’ investment decisions involve processes of promotion and prevention regulation that are managed across separate mental accounts, with different financial products seen as representative of promotion versus prevention. Consistent with this hypothesis, we show that (a) investors are differentially sensitive to gains and losses and differentially risk seeking depending on the financial products being considered and (b) that these phenomena occur because of strong associations between financial products and promotion versus prevention. Therefore, investors’ goals may be determined by the investment opportunities under evaluation rather than being independent of these opportunities, as is assumed in standard finance theory.