Tuesday, February 19, 2008

CNNMoney:Bummed out? Bad time to shop

A new study says incidental emotions can influence the prices at which individuals buy and sell.

NEW YORK (CNN/Money) - Think you paid too much for a little gift you bought yourself after a tough day at the office? A new study suggests your emotions may have pushed you to a bad decision.

According to a study by researchers at Carnegie Mellon University, sadness propels people to spend more for an object than they would have otherwise paid and to sell items at a discount. Disgust, on the other hand, depresses both buying and selling prices.

"We're showing for the first time that incidental emotions from one situation can exert a causal effect on economic behavior in other, ostensibly unrelated situations," Jennifer Lerner, an assistant professor of social and decision sciences and psychology, said in a press release.

During the study, participants were asked to watch scenes from movies that elicited either sadness or disgust. The first group watched a clip from "The Champ" in which a boy's mentor died while the second group viewed a scene from "Trainspotting" of a man using a filthy public toilet. After watching the scenes, participants wrote about how they would feel in similar situations in order to solidify their emotions.

Participants were then asked to buy and sell highlighter pen sets to one another. The disgusted group, on average, were willing to sell the pens for $2.74 compared to the $4.58 price emotionally neutral participants -- a group who watched a documentary -- asked for the same item. The price that disgusted participants paid for the highlighers, $2.98, also lagged behind that of the control group, $3.53.

People who were sad were willing to sell the pens for $3.06 but were willing to buy them for $4.57.

The results led researchers to conclude that sadness pushed participants to try to change their circumstances, which translated to a greater willingness to buy new things or sell items that they own, while disgust caused people to refrain from spending and to rid themselves of things they had already purchased.

Researchers say the implications of the study could be used to decode consumer spending patterns following highly emotional events such as the September 11 terrorist attacks. The study, however, doesn't prove that retail therapy is a valid treatment for the blues.

"We didn't focus on how they felt after they bought things. Instead we focused on what led up to the buying decision," Lerner told CNN/Money.

Lerner and her team are currently planning an experiment that will test the correlation between an individual's emotional state and their investment decisions.

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