Rebuilding the boat while staying afloat: The modeling challenge for behavioral economics

The author comments on the article by Ho, Lim, and Camerer (2006), which showcases the potential of the new behavioral economics approach to marketing with six theoretical "case studies' " Each case study describes a new model of consumer behavior or competitive marketing interactions. The author raises two general questions about such models. The first question is whether behavioral economics is, in reality, a new form of theoretical psychology, competing with existing psychological models and theories and subject to the same vulnerability to evidence as applies to psychological theory. The author argues that behavioral economists are ambivalent about this point, sometimes claiming psychological realism or plausibility as a necessary modeling requirement and other times introducing assumptions for modeling convenience. The second question is whether the impact of behavioral economics on marketing will be experienced more strongly through the development of new quantitative models or through the exploration of qualitative lessons stimulated by behavioral violations of rationality. It is argued that behavioral economics not only contributes new modeling instruments but, through its documentation of rationality violations or "anomalies,'' can provide a rich source of intuitions and insights into consumer psychology as well.