Behaviouronomics: Mental Accounting

Imagine you are in Las Vegas with your friend. While walking on the Las Vegas Boulevard you find a US$ 10 bill sticking out from the side of the pavement, as if it’s telling you “Pick me!” You pick up the note and feel happy about your moderately good fortune.

“Wait a minute! Is that a sign from the universe?” you whisper to yourself. Perhaps Lady Fortuna is nudging you to try out your luck using this US$ 10 totem. After all it’s Las Vegas…the gambler’s paradise.

Your friend however is tired and heads back to the hotel. But you just can’t ignore the sign from above. Taking this as an omen, you enter the first casino and head straight to the roulette table. You want to bet on your lucky number i.e., 7. Sure enough, the roulette ball hits 7 and 35-1 bet wins you US$ 350. You let your winnings ride and the ball lands on 7 again, paying you US$ 12,250. And so it goes. Within an hour you are a multimillionaire with US$ 50 million in your kitty.

Feeling like Daniel Ocean from Ocean’s Eleven, you intend to bring the house down with your raging streak of luck. Being just one step away from becoming a billionaire you bet all your money on number 7 one last time – only to lose it all this time. Broke, dejected and little flabbergasted you walk down several miles to join your friend in the hotel room.

“Where were you man?” asks your friend as you enter the room.

“Playing roulette.” You’re still feeling a little shaken.

“How did you do?”

You cut the story short and tell him, “Not bad. I lost ten dollars.”

My question to you is – “Did you really just lose $10?”

If your answer is yes, then perhaps you are unaware of the behavioural bias called Mental Accounting.

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