Drazen Prelec

Who they are

Prelec is at MIT, as his MIT faculty page shows. In 1998 he and George Loewenstein published "The red and the black" in Marketing Science, on the mental accounting people apply to savings and debt. They argued that people feel an immediate pain of paying that can spoil the pleasure of a purchase, illustrated with a taxi meter, and that cash couples payment and purchase tightly while credit cards loosen the link.

In 2001 he and Duncan Simester reported in Marketing Letters that, in genuine transactions of potentially high value, people told to pay by credit card were willing to pay more, by as much as 100 per cent, an effect they argued was unlikely to arise solely from access to funds. In 2021 he was one of four authors of an exploratory brain-imaging study in which card purchases went with striatal activity that began at the card cue and did not track price.

Key papers

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.

Prelec, D., & Simester, D. (2001). "Always leave home without it: a further investigation of the credit-card effect on willingness to pay." Marketing Letters, 12(1), 5-12. doi:10.1023/A:1008196717017.

Banker, S., Dunfield, D., Huang, A., & Prelec, D. (2021). "Neural mechanisms of credit card spending." Scientific Reports, 11, 4070. doi:10.1038/s41598-021-83488-3.

Key ideas

See The Pain of Paying and Mental Accounting.

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