Saturday, February 09, 2008

The Psychology of Money: Sad people are willing to pay more

A study released yesterday found that participants who had just watched a sad video were willing to pay almost 4 times as much for a water bottle than those who watched a neutral video-- and yet they didn't think that the video or their sadness had anything to do with their decision.

That part of the study actually isn't news-- it backs up a 2004 study that found the same thing. The study was also looking at how much the participants were focused on themselves (self-focused), and measured it by having them write a short essay and counting how many times they referred to themselves in it (the words I, me, my, myself.)

The study found that the sad subjects were willing to pay $2.11 on average for the water bottle, compared to $0.56 on average by the neutral subjects. Their analysis also found that among subjects with low self-focus, their sadness level did not have a significant effect on what they were willing to pay, and they hypothesize that the findings are caused by the increased self-focus that usually results from feeling sad.

What I find most interesting about the study is the lack of self-awareness by the participants. Most of us are aware to some degree that when we're feeling down, we're drawn to spend more money in a conscious or semi-conscious attempt to feel better. (I've written about it here.) But this goes even further than that:

Despite the big difference, participants in the sad group typically insisted that the video's emotional content didn't affect their willingness to spend more — an incorrect assumption, said one of the study's co-authors.

"This is a phenomenon that occurs without awareness," Jennifer Lerner, a Harvard professor who studies emotion and decision making, said in a phone interview. "This is really different from the idea of retail therapy, where people are feeling negative and want to cheer themselves up by shopping. People have no idea this is going on."

So if this is a subconscious effect of feeling sad, what can we do about it? I guess one strategy would be to avoid shopping at all when we're sad, even if it's not "cheer me up" shopping we're inclined to do. Another would be to make a general effort to focus externally when you're sad, rather than dwell on yourself. But another strategy-- much more complicated and broad, but more rewarding, too-- is to try to be happier, of course! It seems to me that this is an argument against the "suffer and struggle today to save up money for a happier future" approach... if our self-sacrifice today is making us sadder, it may be undermining our efforts to be frugal even if we don't notice it, whereas pursuing happiness may help us keep our spending down.

What do you think of all this? It's kind of hard to ask "Do you think being sad has subconsciously affected your spending?" but looking back in retrospect, can you spot any of that happening? Does learning about a study like this affect how you plan your future behavior? (Personally, I'm totally fascinated by studies that uncover things that affect us subconsciously-- I really do try to keep them in mind and remind myself that my conscious perception of why I do things isn't always fully reliable!)

(hat tip to Smart Spending)


chosha said...

Comfort shopping. Makes total sense to me.

michelle said...

I can see this happening in the past, and now that I've learned about the study, I'm definitely going to try avoid shopping when I'm feeling down.

Mom said...

very interesting

mike said...

I think that this would apply to gambling as well. In retrospect, I think that I am more willing to gamble more when sad, bored, uninspired, etc, etc.

Having lost money, makes you sadder and the problem builds.

...... maybe..