Louisa has wanted a Louis Vuitton handbag ever since she saw one on the television show Sex and the City. She could never imagine adjusting her household budget in order to save up the money to buy such an item as it was an outrageous amount to spend on a purse. This year she received a large bonus at work and went directly to the Louis Vuitton website and ordered the handbag. What bias does this behaviour reflect?

A) loss aversion
B) the house money effect
C) reference point movement
D) brand generalization

Question

Jahlyn Mckie · Accepted Answer

Final Answer : B, Explanation :  The behavior reflects the house money effect, which occurs when people are more willing to spend freely with money that is perceived as unexpected or a windfall, such as a bonus, rather than money that has been earned through regular income.

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