Congratulations to Richard Thaler,
Winner of the 2017 Nobel Prize in Economics

K. Sudhir, Editor-in-Chief

Marketing Science congratulates Professor Richard Thaler of the University of Chicago’s Booth School of Business on winning the 2017 Nobel Prize in Economics for his contributions to the field of behavioral economics. The Nobel citation prominently features Professor Thaler’s 1985 paper “Mental Accounting and Consumer Choice,” published in Marketing Science.

See press releases from the Nobel Committee and INFORMS related to Thaler’s Nobel win. A more detailed description of the contributions of Thaler as judged by the Nobel committee can be found here.

By Thaler’s definition, mental accounting is “the set of cognitive operations used by individuals and households to organize, evaluate, and keep track of financial activities.” The 1985 paper is the second highest cited paper in Marketing Science to-date, and has spawned important follow up work both at Marketing Science (e.g., Prelec and Lowenestein 1998; Soman and Cheema 2002) and in various other marketing, finance, and economics journals. For an overview of how mental accounting affects choice in a variety of settings including consumption, savings, individual budgeting, self-control and giving, see Thaler (1999). In an invited Marketing Science commentary, Thaler (2008) provides a retrospective evaluation of the impact of the 1985 paper in the fields of marketing, finance, and economics.

The ideas in “Mental Accounting...” have had significant impact on public policy in the appropriate design of “nudges” that improve decisions about health, wealth, and happiness. These ideas are well described in Sunstein and Thaler’s 2008 popular book Nudge.

Please see below a brief reminiscence from Subrata Sen about the review process for the mental accounting paper. Also read Thaler’s more colorful description in Thaler (2008). The award of a Nobel prize for work published in Marketing Science is an occasion for celebration for the journal and the field. But Subrata’s story is also a cautionary tale for all of us that traditional standards of evaluation in the review process may lead us to reject potentially path-breaking work, especially ones that comes from novel areas and paradigms. In my 2016 editorial, I discussed how reviewers and editors should consider the exploration-exploitation tradeoff when evaluating papers to address this issue (Sudhir 2016). The story of the review process for a Nobel enabling paper should also serve to remind us all about the need for a certain level of humility when evaluating papers, their contributions and potential impact, especially when in novel areas and paradigms.

References

Thaler R (1985) Mental accounting and consumer choice. Marketing Science 4(3) 199-214. doi: 10.1287/mksc.4.3.199

Prelec D, Loewenstein G (1998) The red and the black: Mental accounting of savings and debt. Marketing Science 17(1) 4-28. doi: 10.1287/mksc.17.1.4

Thaler RH (1999) Mental accounting matters. Journal of Behavioral Decision Making 12(3) 183. doi: 10.1002/(SICI)1099-0771(199909)12:3<183::AID-BDM318>3.0.CO;2-F

Soman D, Cheema A (2002) The effect of credit on spending decisions: The role of the credit limit and credibility. Marketing Science 21(1) 32-53. doi: 10.1287/mksc.21.1.32.155

Thaler RH (2008) Commentary—Mental accounting and consumer choice: Anatomy of a failure. Marketing Science 27(1) 12-14. doi: 10.1287/mksc.1070.0348

Sunstein C, Thaler R (2008) Nudge: The Politics of Libertarian Paternalism. Yale University Press, New Haven.

Sudhir K (2016) The exploration-exploitation tradeoff and efficiency in knowledge production. Marketing Science 35(1) 1-9. doi: 10.1287/mksc.2015.0974

 

The “Story” Behind the Publication of “Mental Accounting...”
at Marketing Science

Subrata Sen

I was delighted to learn that Dick Thaler had been awarded the 2017 Nobel Prize in Economics. It is a well-deserved honor.

His win reminded me of when he submitted the paper (“Mental Accounting and Consumer Choice”) to Marketing Science. It was full of great ideas but contained no math. As a result, the referees rejected it, saying that it wasn’t appropriate for a quantitative journal like Marketing Science. However, as I thought about it, I became increasingly convinced that the paper would have great impact and would encourage a host of researchers to continue this stream of work. Hence, I called Abel Jeuland (the Area Editor for the paper) to discuss what we should do. After a short conversation we agreed to ignore the referees’ comments and publish the paper. It was the best decision that I made as Editor of Marketing Science.

I was correct in predicting that the paper would have great impact (for a long time it was the most-cited paper in Marketing Science) but must admit that I didn’t think that it would help win the Nobel Prize. I am so glad that I was wrong!