Why budgets backfire
Common sense--not to mention financial advisers--will tell you to adopt spending targets or limits when looking to buy something. Don’t buy it. New research finds that such thinking can backfire. People who were first asked how much they planned to spend on a product went on to choose a more expensive product than if they hadn’t thought about how much they would spend. This happens because, after narrowing their focus to acceptably priced options, consumers seem to leave price considerations behind and focus more exclusively on quality differences, which are magnified in the context of the consumer’s narrow focus. Thus, the consumer is more likely to choose the higher-quality but higher-priced option.
