A Suggested Approach to Rationalize the Negative Effects of Mental Accounting on Outsourcing Decision-Making Process in Order to Increase its Effectiveness: A Case Study

Abstract

The term Mental Accounting is considered one of the modern accounting terms most used in the process of making financial decisions for consumers, and despite the widespread use of mental accounting among various consumers, there is still a gap in the understanding of Mental Accounting. Therefore, this study provides a cognitive framework to understand some of the foundations upon which Mental Accounting is based.

This study also provides a general description of the concept of Mental Accounting. In addition, this study discusses the various negative effects directly related to the use of Mental Accounting, which the decision maker is exposed to when making the Outsourcing decision.

Therefore, this research focused on studying the relationship between rationalizing the negative effects of Mental Accounting on the Outsourcing decision-making process and increasing its effectiveness. This study provided a suggested approach to rationalize these negative impacts with the aim of increasing the effectiveness of the undertaking decision. The study suggested that rationalizing the negative effects of Mental Accounting in the undertaking decision-making process is expected to affect the increase in the effectiveness of this decision.

By using the case study approach of an Egyptian industrial company in the field of fire extinguishing devices, the results of the study showed that rationalizing the negative effects of Mental Accounting in the process of undertaking decision-making has had a positive effect on increasing the effectiveness of this decision in the company under study. The results of the case study also demonstrated the effectiveness of the suggested approach.