The Psychology of Spending: Why We Buy Things We Don't Need
Consider clicking open your preferred shopping application on a busy day with no intent to make a purchase but finding yourself staring at a jacket that costs ₹3,000, one that you have been eyeing for the past few months. You hesitate before buying the jacket.
What just happened?
Perhaps you did not suddenly realise how much you needed the jacket. Something must have happened between the time that you saw the jacket on your phone screen and the time that your hand moved to 'Buy Now'. You were perhaps bored, stressed, delighted, or influenced by the purchases of others. Perhaps you even convinced yourself that ₹3,000 was affordable, or that it was simply too good a deal to pass up.
Standard economic theory assumes that people make rational decisions according to their preferences, the information available at the time of the decision, and their budget.
Behavioural economics complicates this picture by suggesting that decision-making is informed by emotional, social, and psychological factors.
The value of the goods and services that we consume may not stem exclusively from the characteristics of the item itself.
Consider the following.
How Emotions Can Turn Wants Into Purchases
Going back to the example of spontaneously buying a jacket while browsing through a shopping app on a busy day, buying behaviour like this is referred to as impulse buying.
According to a meta-analysis conducted by Iyer et al. (2020), across 186 papers, 231 samples, 75,139 consumers, impulse buying was associated with hedonic motives, marketing stimuli, social norms, mood, and individual differences. The researchers also found that self-control could interrupt the process of buying on impulse.
This suggests that while buying behaviour might be attributed to poor impulse control, it may not always be that simple. What then prompted the impulsive buying?
According to the analysis, shopping can be a means of fulfilling hedonic needs. What did the purchase promise at the time of buying? If you were bored, shopping promised you fun. If you were delighted, the purchase might have prolonged the feeling that prompted you to shop in the first place. If you were stressed, the purchase might have promised an escape.
It is easy to attribute buying behaviour to emotions, but the analysis suggests that while both positive and negative emotions can be associated with impulse buying, it isn't exclusively tied to one or the other. It may also not be always easy to explain exactly how a particular feeling prompted the buying decision.
Perhaps the purchase was not motivated by emotion alone. Perhaps it was also motivated by self-identity, social norms, or the way the purchase itself was presented.
There is another factor to consider; the process of paying itself.
Prelec and Simester's (2001) research into the credit-card effect examined whether payment methods could affect a consumer's willingness to pay. Their experiments suggested that consumers expecting to pay by credit card could be willing to pay more than consumers expecting to pay in cash.
The product itself has not changed. What has changed is the psychological experience associated with paying for it.
In the context of impulsive buying, this suggests that the buying decision is part of a process that also entails paying for the item, and the manner of payment can affect how that process is experienced. You may have impulsively bought an item because you thought it was a great deal or wanted to treat yourself, but the way you pay can also affect how costly that purchase feels.
To summarise, impulsive buying is associated with fulfilling hedonic needs, but other factors, including social influences, individual differences, and the manner of payment, can also play a role. While the item purchased may not have been necessary at the time of purchase, the decision to buy it could still have been rewarding at that moment.
We Often Buy Things Not for What They Are But for What They Represent
Some items serve a utilitarian function. Shoes protect our feet, phones allow us to communicate with others, and watches tell us the time.
Other items, however, can be bought for reasons beyond their utility.
Consider a teenager browsing through social media and seeing their friends wear the same pair of sneakers. At the time of purchase, the sneakers may represent social inclusion.
Social comparison research has established that individuals compare themselves with others, particularly when they are uncertain about how they stand on a particular issue (Taylor & Lobel, 1989). In other words, when we are unsure about how we are doing, we look to others for information about where we stand.
Consumption can therefore be influenced by social comparison as the perceived value of a good may depend partly on whether others have it. If others have it, the product may represent more than its physical characteristics. It may also represent belonging to a particular social group.
Iyer et al. (2020) found that social norms were associated with impulse buying, while self-identity was associated with impulse buying, although to a lesser extent.
This suggests that individuals may buy products not only for what they are, but for what they represent - for instance, as a means of expressing identity or establishing their position within a social group.
It is not always the desire to 'keep up with the Joneses' that drives a purchase. Sometimes, it can be the desire to express who we think we are - or who we would like to be.
With this in mind, consider an individual seeing a ₹5,000 jacket and thinking, "That is too expensive." When presented with the same jacket, another individual might think, "That looks nice."
What the two individuals see is the same, but the value they attribute to it differs.
The same principle can operate between several options. A ₹2,000 jacket might seem ordinary, while a ₹3,000 jacket can suddenly seem more attractive if a ₹5,000 option is placed beside it. The ₹3,000 jacket itself has not changed; its comparison set has.
Perhaps more interestingly, social consumption operates on an asymmetry: consumers can see what others buy, but others cannot see the sacrifices that must be made to afford those purchases.
New phones are visible, but the opportunity cost of the phone is not. Fashionable clothes are visible, but the sacrifice required to afford them may not be obvious.
Consumption for status reasons may not always be inherently "bad". After all, consuming goods and services can be enjoyable, and social approval can also be rewarding.
The motivation for consumption can, however, shift from purely utilitarian reasons to social ones. When considering a purchase, the question may not always be, "Do I need this?"
The question may instead be:
"What does this say about me?"
Given this, consider the following question: if companies were to take advantage of these phenomena and change the environment in which we make purchase decisions, what might they do?
Sometimes, How We See a Deal Changes What It Is Worth
Consider seeing a jacket that previously cost ₹8,000, now priced at ₹4,999.
Before deciding whether ₹4,999 is actually a good price for the jacket, consider the role of the original ₹8,000 price. That price becomes a reference point against which the ₹4,999 price is evaluated.
This is known as anchoring. The anchoring effect describes how people can rely on an initial number or reference point when making judgments.
Simonson and Drolet's (2004) research found that consumers' willingness to pay could be influenced by arbitrary numerical anchors. In one experiment, the researchers used the last two digits of participants' Social Security numbers as an intentionally irrelevant anchor.
Interestingly, the anchoring effect became substantially smaller when participants were first asked to explain how they would determine a reasonable price.
This suggests that explicitly thinking about how we determine value can reduce the influence of an anchor. In other words, simply asking ourselves, "How did I decide that this was worth this much?" may change the way we evaluate a purchase.
Anchoring is only one way in which presentation can influence value perception.
Another is the decoy effect, in which the presence of a third option can influence the decision between two other options. Heath and Chatterjee's (1995) research on asymmetric decoys found that adding a decoy could increase the choice share of a preferred option, although the effect varied depending on brand quality and the consumer population.
One interesting finding was that the decoy effect was smaller in India than in the United States. This suggests that while the presentation of options can influence decision-making, the effect may not operate identically across different consumer populations.
The broader idea is important: a product does not necessarily have to change to become more appealing. Changing what it is compared with can change the way we approach it.
Another way companies, particularly those offering buy-now-pay-later (BNPL) services, change the presentation of a purchase is by displaying the cost as a series of instalments rather than as one outright price.
BNPL research published in the Journal of Retailing in 2025, using transactional data and five experiments, found that BNPL can increase consumer spending in part because consumers perceive instalment payments as less costly than the same total amount presented as a single payment (Ashby et al., 2025).
The total expense has not changed. What has changed is the way the cost is presented.
A ₹5,000 purchase can therefore be mentally encountered as either "₹5,000" or "four payments of ₹1,250." The mathematical total is identical, but the psychological presentation is not.
What anchoring, decoys, and instalment formatting have in common is that they suggest that the way information about a purchase is presented can influence the decision to buy. Once the purchase has been made, however, how does it influence the buyer?
What Happens After You Buy Something?
The initial excitement of a purchase often fades.
When purchasing an item, you may have focused on the excitement of the purchase, the discount, the utility, or the social meaning attached to it. Once you have the item in your possession, however, you can consider whether the purchase was actually worth it.
This may lead to buyer's remorse, where a consumer regrets a purchase. Research on impulse buying has also discussed regret and cognitive dissonance in the context of buying behaviour (Iyer et al., 2020).
The consumer may therefore move from asking:
"Why not buy it?"
to asking:
"Why did I buy it?"
The item itself has not changed. What has changed is the consumer's perspective on the purchase.
The more interesting question, then, is whether the feeling associated with the purchase was the reason for buying it in the first place.
Spending can be viewed as a simple behaviour informed by the questions, "Do I need this?" and "Can I afford it?"
Human psychology is rarely so simple.
Emotional states can make the reward of an impulsive purchase more valuable in the moment. Social interactions can prompt us to buy things we might not otherwise buy. The presentation of a purchase can also change how we perceive its price or attractiveness.
Anchoring, decoy effects, and instalment formatting can all affect how information surrounding a purchase is processed, while impulse buying can be associated with self-identity, social norms, and both positive and negative emotions.
None of these factors eliminate consumer agency. Consumers are not simply "duped" into buying things, and not every purchase that goes beyond basic necessity is irrational. Sometimes, we knowingly spend money on things because they provide enjoyment, meaning, convenience, or social connection.
The more interesting question is not simply whether we wanted something, but why we wanted it at that particular moment.
Was it because we valued the product itself? Because we were excited? Because everyone else seemed to have it? Because a ₹10,000 original price made ₹5,000 seem like a fantastic deal? Or because four payments of ₹1,250 sounded more reasonable than a single payment of ₹5,000?
Sometimes, we are not just buying the product.
We are buying the feeling, identity, or convenience attached to it.
References
Iyer, G. R., Blut, M., Xiao, S. H., & Grewal, D. (2020). Impulse buying: A meta-analytic review. Journal of the Academy of Marketing Science.
Prelec, D., & Simester, D. (2001). Always leave home without it: A further investigation of the credit-card effect on willingness to pay. Marketing Letters
Ashby, R., Sharifi, S., Yao, J., & Ang, L. (2025). The influence of the buy-now-pay-later payment mode on consumer spending decisions. Journal of Retailing
Heath, T. B., & Chatterjee, S. (1995). Asymmetric decoy effects on lower-quality versus higher-quality brands: Meta-analytic and experimental evidence. Journal of Consumer Research
Simonson, I., & Drolet, A. (2004). Anchoring effects on consumers' willingness-to-pay and willingness-to-accept. Journal of Consumer Research
Taylor, S. E., & Lobel, M. (1989). Social comparison activity under threat: Downward evaluation and upward contacts. Psychological Review https://psycnet.apa.org/doiLanding?doi=10.1037%2F0033-295X.96.4.569
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