MKTG 322 exam 2 - FLASHCARDS - Financial decision making and well being

Question 1

What refers to the negative emotions people experience when they have to pay for goods or services?

Answer 1

Pain of paying

Question 2

What is the level of pain in pain of paying affected by?

Answer 2

The payment method and the timing of the payment

Question 3

What are the 5 principles of financial decision making?

Answer 3

1. Mental accounting
2. Sunk cost fallacy
3. Price relativity
4. Price bundling
5. Price fairness

Question 4

What is the property of a good or a commodity whose individual units are essentially interchangeable?

Answer 4

Principle of fungibility

Question 5

What refers to the different values a person places on the same amount of money, based on subjective criteria?

Answer 5

Mental accounting

Question 6

What is a good example of mental accounting

Answer 6

Imagine that you have decided to see a play where admission is $20/ticket. As you enter the theater, you realize you have lost a $20 bill.
Would you still pay $20 for a ticket for the play?

Now imagine that you have decided to see a play and paid the admission price of $20/ticket. As you enter the theater, you discover that you have lost the ticket. The seat was not marked, and the ticket cannot be recovered.
Would you pay $20 for another ticket?

Question 7

What is the act of continuing an action just because of an unrecoverable investment rather than a rational decision that will maximize present utility?

Answer 7

Sunk cost fallacy

Question 8

A family pays $40 for tickets to a basketball game to be played 60 miles from their home. On the day of the game there is a snowstorm. They decide to go anyway, but note in passing that had the tickets been given to them, they would have stayed home. What is this an example of?

Answer 8

Sunk cost fallacy

Question 9

A man joins a tennis club and pays a $300 yearly membership fee. After two weeks of playing he develops an elbow injury. He continues to play (in pain) saying ‘I don’t want to waste the $300!’. What is this an example of?

Answer 9

Sunk cost fallacy

Question 10

True or false: People ignore sunk costs, eventually?

Answer 10

TRUE

Question 11

What is the gradual reduction in the relevance of prior expenditures?

Answer 11

Payment depreciation

Question 12

What is price relativity?

Answer 12

• We make decisions in a relative way and compare them
locally
• The significance of small amounts are reduced in the
context of a large expenditure. 5 dollars is more significant in a 30 dollar calculator than in a 250 dollar coat

Question 13

You see a coat for 250 dollars at Target and one for 240 dollars at Macy’s. These stores are 20 minutes away. Would you drive 20 minutes to save 10 dollars? What is this an example of?

Answer 13

Price relativity

Question 14

You see a calculator for 30 dollars at Target and one for 20 dollars at Best Buy. Would you drive 20 minutes to save 10 dollars? What is this an example of?

Answer 14

Price relativity

Question 15

What is payment decoupling?

Answer 15

Separating the pain of payment from the consumption decision

Question 16

What are situations in which separating the payment from consumption is helpful for marketers?

Answer 16

• All-inclusive resorts
• Annual membership fees for health clubs
• Flat-fee services

Question 17

Ernie and Bert are serious skiers who have each pre-
purchased four days’ worth of lift tickets. Having gone to
different vendors, Ernie paid $40 for each of four one-day
lift tickets, and Bert paid $160 for a four-day ski pass. Both
men have enjoyed three days of skiing in perfect
conditions.
Unfortunately each wakes up on the fourth day to find that
ski conditions have deteriorated considerably.
Who is more likely to ski in spite of the poor
conditions?

Answer 17

Ernie has unbundled tickets and has a nonrefundable, unused ticket for that fourth day. Bert has a bundled pass and has a partially used pass that expires on that fourth day

Question 18

What is the formula for aqquisition unity?

Answer 18

Perceived Value – Price

Question 19

True or false: Consumer feel entitled to an existing ‘reference’ price?

Answer 19

TRUE

Question 20

True or false: It is perceived as unfair for firms to impose losses on its customers to profit more?

Answer 20

TRUE

Question 21

What is repayment by purchase?

Answer 21

How do you decide how much of your credit card debt to pay each month?