Harvard Mental Health Letter

Moods and markets

An experiment published in the journal Psychological Science demonstrates a surprising effect of emotion on decisions about buying and selling. Economists are familiar with a phenomenon called the endowment effect: The price we demand to part with something we own is higher than the price we are willing to pay for it when it belongs to someone else. In other words, we value things more highly when we own them than when we don't. The experiment shows that the endowment effect is not an iron law but subject in a surprising way to the influence of emotions "" even feelings that have nothing to do with the market transaction itself.

Two hundred college students were divided at random into three groups that watched a video: one evoking sadness (the death of a boy's mentor), one evoking disgust (a filthy toilet), or a neutral one (fish on a coral reef). They wrote about their feelings during the video. Then half of them, again chosen at random, took the role of sellers. They were given a highlighter set and asked to choose the price at which they would be willing to sell it back to the experimenters; offers ranged from 50¢ to $14.

The rest of the subjects were given the role of buyers. They could not be asked to supply their own money, because that would complicate the experiment too much; feelings about parting with money depend on how much of it you have to begin with. Instead, the experimenters offered what is called a choice price. Buyers could take the highlighter set, or they could take cash instead, again in a range from 50¢ to $14. The choice price resembles a buying price, except that it offers the alternatives of receiving or not receiving money, rather than a decision between departing with money and obtaining more.

To continue reading this article, you must login.
  • Research health conditions
  • Check your symptoms
  • Prepare for a doctor's visit or test
  • Find the best treatments and procedures for you
  • Explore options for better nutrition and exercise
Learn more about the many benefits and features of joining Harvard Health Online »