The Effect of Construal Level on Mental Accounting: Abstract (vs. Concrete) Construal Reduces the Mental Labeling Effect

ABSTRACT Mental accounting research exhibits how consumers' marketplace behaviors deviate from those predicted by the Standard Economic Theory. For example, research shows how money loses fungibility when people assign mental labels to their currency and make purchases consistent with such labels. Although the applications of mental accounting are well researched, we have limited understanding of how people construct their mental accounts. This research exhibits that people's mental horizon (broad vs. narrow), as defined by construal level, influences the nature of their mental accounting. Although consumers' mental accounts are narrowly defined at concrete construal, they construct superordinate mental accounts at abstract construal. Consequently, stronger (vs. weaker) mental labeling effects emerge at concrete (vs. abstract) levels of construal. Studies 1A–1C exhibit this phenomenon utilizing a field study and multiple studies applying various decision‐making contexts. Studies 2a and 2b exhibit the underlying psychological process of this outcome that enhanced sense of situational control mediates this effect. Implications of these findings include divergence in cross‐category effects of price promotions, spending of restricted use funds, and mental labeling of food containers across concrete and abstract thinking.