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Archive for the ‘Consumer behavior’ Category

Why do people want more money?

Philosophers, economists, and researchers have been pondering that question for hundreds, if not thousands, of years. One reason for the question — more money does not contribute that much to a person’s happiness.

If that is true, then why do people want more money?

There could be several explanations, according to researchers.

First, it could be that people don’t realize more money will not raise their well-being, although this is suspect since in studies most people say that money is not that important in their hierarchy of values.

It could also be that people enjoy the goal of attaining higher incomes more than the money itself and what it represents.

One other explanation, according to researchers, is that people may seek money because it produces short-terms benefits, even though a person’s long-term happiness does not move.

And finally, people may feel a strong need to acquire money, goods and services simply because of societal pressure. Individuals may feel they need to buy things to gain status and not be perceived as failures.

Whatever the reason, the research remains pretty strong — once a minimum level of existence or income occurs — higher income has only a modest impact on a person’s long-term happiness.

Source: Will money increase subjective well-being? Diener, E., & Biswas-Diener, R. Social Indicators Research, 57, 119-169 (2002).

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It turns out pleasure comes in a bottle — albeit an expensive one.

That’s what researchers discovered recently when they tested the neural activity of study participants after showing them expensive and inexpensive wines.

The results showed increased brain activity in the the medial orbitofrontal cortex — an area of the brain believed to encode pleasure related to taste, odors and music — when participants tasted “pricey” wines. They also found that inflating the price of a bottle of wine enhanced a person’s experience of drinking it, based on the corresponding neural activity.

But here’s the interesting part.

It was a blind taste test. Participants never knew the quality of the wine. They were just told the price. In fact, researchers presented two of the wines twice, once with the true price tag, and again with a fake one. They also passed off a $90 bottle of wine for one they said was $10 and showed a $5 dollar bottle as one costing $45.

Researchers say that their study demonstrates how subjective beliefs come into play with respect to the quality of an experience.

“If you believe that the experience is better, even though it’s the same wine, the rewards center of the brain encodes it as feeling better,” said Antonio Rangel, associate professor of economics at the California Institute of Technology and lead researcher.

Marketers have known this for years. This just confirms it.

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We all know buying something can be pretty satisfying. But we often have to weigh that satisfaction with the fact that we must to pay for it, which can sometimes be downright painful. A recent study suggests that this pleasure/pain battle is common in our brains when we buy things and explains why paying with a credit card is so much easier.

The study testing this hypothesis (as explained in this WebMD article by Miranda Hiti) involved giving 26 healthy young adults $20 to spend and then studying their brains with Functional MRI scans. When the students liked an item, a certain brain area called the nucleus accumbens was particularly active. But if they thought items were overpriced, another brain area (the insula) became more active and a third brain area (the mesial prefrontal cortex) became less active. Researchers concluded from the results that when people are deciding whether to buy something, their brain apparently weighs the pleasure of making the purchase against the pain of spending the money.

“The findings are consistent with the hypothesis that the brain frames preference as a potential benefit and price as a potential cost,” the researchers write.

This could explain why paying with a credit card is so much easier for us — it delays or removes the “pain” associated with paying for something in our brains, even if we know that paying for that item over time will cost us more money in the long run. We choose the short-term benefit or pleasure for the potential long-term “pain.”

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