Budgeting is generally a good way to save money. But Jeff Larson and I identified one way in which budgets can backfire and cause people to spend more. It turns out that when people set a price restraint on themselves before they see the options available, they subsequently focus on non-price, quality attributes. This focus on quality often leads these consumers to choose a more expensive option than they would have if they hadn’t set a budget.
Larson, Jeffrey & Ryan Hamilton, (2012) “When Budgeting Backfires: How Self-imposed Price Restraints Can Increase Spending,” Journal of Marketing Research, 49 (April)
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