Paying for your sadness

Paying for yourSadnessThe Effects of Emotions when making Financial Decisions

Windows User Roain Saunders Research Methods

The Effects of Emotions when making Financial DecisionsRoain Saunders

Abstract

• Emotions have long been known to be an influencer of

individual’s behaviors. Many studies have been conducted to

determine the reasons why emotions have played a major role

in making decisions. Well-known individuals have conducted

these studies with the necessary resources needed to conduct

the research. The main focus of this study is to determine

how one’s emotions related to the financial decisions

individuals make. In this study I will make an attempt to

reconstruct the experiment conducted by previous

researchers. A perfect replication of this study will not be

accomplished because of lack resources and the number of

volunteers that is needed to participate in this study.

There will be two groups within this study, an experiment

group and a control group. The Experiment group will be

influence by a sad event while making a financial decision

while the control is being exposed to neutral condition.

This is to see if and how their emotions influence their

pricing choice.

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Background

Making financial decisions are very important. If there were

information on how financial decisions can be positively or

negative influence by one’s emotion, would anyone take advantage

of such information. Individuals like market makers and suppliers

of products and services can greatly use this information to make

more money when selling commodities. Financial services companies

fail to address the behaviors of individuals whose financial

decisions are being influenced by their emotions. With this

information being exposed to suppliers of consumer products and

services, they can take advantage of people’s emotions, which

could lead individuals to spend more money than usual or purchase

a product, or services they do not need. Being emotionally2 | P a g e


unstable and faced with financial decisions will negatively

influence one’s spending power and possible increase their

chances of being in debt? According to researchers, “sad event,

coupled with self-focus, triggers an implicit devaluation or

diminished sense of self…which triggers an implicit desire to

enhance the self…which in turn increases valuation of possessions

that one might acquire”(Cryder, Lerner, Gross and Dahl, 2008).

When individuals focus on themselves while being sad, they tend

to devalue oneself, and because of such devaluation they seek

opportunities to change those negative thoughts.

To better understand the study, researchers created

experiments that focused on the behaviors of individuals when

they are placed in a sad and neutral condition. To find out how

reliable the results were; replications of the study were

conducted. Within these studies, not only did individuals spend

more when emotions were involved, they also gave up the

opportunity to receive more money in the future because of the

desire to have money now. I will make an attempt to conduct an

experiment involving college students from two different classes.

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These individuals will volunteer their time to conduct the

experiment by being exposed to different emotional conditions,

reporting on how they feel before and after they are exposed to

each condition. Finally they will price two items by using a

price-elicitation chart. Within this experiment, there will be

two variables, the independent variable and the dependent

variable. The independent variable will be influencing

participant’s emotions while the dependent variable will be

observing how individuals react to the introduced condition and

how they behave when pricing the intended items.

Past Literature

An emotion can play a major role in the life of many individuals.

Financial decisions people make can be influenced by their

emotions, which can produce positive or negative outcomes. Are

people aware of how their emotions can influence their behaviors?

Can such information be used as an advantage to market makers and

companies who sell products and services? Are there different

types of behaviors that can come from only one emotion? If so,

can market makers and suppliers of products and services

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determine which behavior an emotional effected consumer would use

when making a financial decision? I gained interest in this topic

when I realized how individuals around me were behaving when they

were making financial decisions. Based on my observation,

individuals were spending more money when they are upset, sad,

happy or angry. It is possible to argue the reasons why

individuals were spending more money than usual when they are

happy, but it was quite challenging to determine the reasons why

individuals would spend more money when they are upset, angry or

sad. Is it really emotions that are causing individuals to pay

more to acquire a commodity, or is it that individuals have

learned how to make financial decisions unconsciously? Although

there are different types of emotions individuals’ faces, this

study will focus on how individuals make financial decisions when

experiencing a sad case of emotions. Studies have shown that when

individuals are experiencing feeling sad while focusing on one

self, they tend to pay more money for an item. According to

Cryder, Lerner, Gross and Dahl (2008), “ sadness has an intimate

connection with oneself…and the desire to enhance the self-

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elicits increased valuation of possessions that one might

acquire” (p.526). Empirical evidence indicates that devaluation

of one self is closely related to feeling sad or feeling empathy

for others when they are experience a sad event can in turn cause

individuals to feel sad and spend more as shown in figure 1.

Sadness has been shown to trigger a generalized devaluation of

the self, which indeed is considered a negative effect of sad

emotions.

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Sad Event

Self-Focused

Devaluation of self

Desire to enhance self

Increased valuation of possessions that one might acquire


Figure 1.According to researchers Lerner, Li and Weber (2013) a sad event

can cause negative or positive emotion and such emotions can

influence ones behavior:

No studies have examined the potential causal effect of

negative emotions…one cannot assume that the effects or

negative emotions will simply be the opposite of the

effects of positive emotions…moreover; several studies

have found that emotions of the same valence can have

opposing effects on decision making (p. 73).

An individual’s behavior can be the same even if they are

experiencing different emotions. One should not assume that the

same emotion would produce the same behavior when making a

financial decision.

Hypothesis

The approach of this study is based on the hypothesis that when

individuals are experiencing a specific emotion, it can

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positively or negatively influences their financial decisions.

The specific emotion that relates to this hypothesis is feeling

sad when being introduced to a sad event while making a financial

decision.

Methods

Participants- students from Alfred State College will be

recruited to volunteer in this experiment. Outcome might be bias

because of the level of education students may have about making

financial decisions. If students are freshman or upper-classmen,

the specific classes they are taking, or have taken may influence

their decisions, (i.e. financial planning, investments or

retirement planning).

Procedure:

A specific condition will be assigned to participants from both

class. The conditions I will be using are neutral condition,

which is the control group and a sadness condition, which will be

the experiment group. The control group will be watching a video

clip about the Great Barrier Reef. The experiment group, the one

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that will be enticed with sadness will be watching a video clip

about a daughter who tried to commit suicide because her father

had a disability. Before watching each videos, I will ask

participants to record how their feelings so I can see if there

are any changes after watching the video. After the videos are

over I will ask each participant to write a short summary about

how they’re feeling after watching the video, some form of self-

focused essay. The next step will be showing the participants’

two items to price by using the standard price-elicitation

procedures used by experimental economics. Participants will

write what price they would pay for each item ranging from $0 to

$30 in $0.50 increments. The items participants will be pricing

are an Aquafina water (item A) and a Google water bottle (item

B). Participants will record the price they will pay on the same

subject they wrote their self- focused essay. After each

participant is finish, I will collect the document and review

data for results.

Results

49 college students participated

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Age = 18-49

Average age = 21.5

Sad Condition

Price range for item A = $0.50 - $4.00

Average price for item A = $1.86

Price range for item B = $0.00 - $27.50

Average price for item B = $8.84

Neutral Condition

Price range for item A = $0.50 - $10.00

Average price for item A = $ 2.64

Price range for item B = $0.00 - $20.00

Average price for item B = $9.88

Average price for

Aquafina

Average price for Google water bottle

Sad $1.86 $8.8410 | P a g e


Control $2.64 $9.88

Figure 2.

The difference paid for the Aquafina water when influenced

with the sad condition is $0.78

o Calculations[$2.64 - $1.86 = $0.78]

o This indicates that on average, individuals in this

study would pay $0.78 less for item A when they are

feeling sad.

The difference paid for the Google water bottle when

influenced with the sad condition is $1.04

o Calculation [$9.88 - $8.84 = $1.04]

o This indicates that on average, individuals in this

study would pay $1.04 less for item B when they are

feeling sad.

Report on Sad Condition

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Two individuals who were influenced by the sad condition

paid the same amount when relating to the lowest priced ($0.50)

paid for Item A (Aquafina water). One individual stated that

before the video they were feeling happy because of having the

opportunity to finish their final projects and papers. However,

another individual who paid the same price indicate that before

the video they were feeling exhausted and overwhelmed. After

participants watch the sad video, individuals who paid the least

amount for item A reported that both of their emotions were

feeling sad, which led to them to crying while bringing up past

experiences involving their fathers. After analyzing the data, it

had come to my attention that the individual who paid the most

($4.00) for item A shared the same emotions of individuals who

paid the least amount after watching the video. See figure 3 for

results.

However, the participant who paid the most did not share the

same emotions before watching the sadness condition video as the

individuals who paid the least amount. As for item B (Google

water bottle), participants who paid the least did not share the

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same emotions with participants who paid the most before watching

the video or after watching the video. See figure 4 for results.

As you can see, two individuals who paid the least amount of

money for item B stated they were stressed, anxious and hesitant

before watching the video, but after watching the video, they

reported that they were sad, anxious, stressed, overwhelmed and

showing pity. This raises the question of whether individuals who

were stressed, anxious and hesitant before being introduced to

the sad condition can be influenced to not spend more money or

any money at all for an item. After watching the video, reports

from participant who paid the least indicated that they were more

anxious, stressed and sad than they were before. As you can see

in both figure 3 and figure 4, before watching the video the

participant who paid the most for item A shared the same emotions

with the participant who paid the least for item B. They also

shared similar emotions after watching the video. This indicates

that the same emotions can lead to different outcomes when making

a financial decision.

Item A

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(Aquafina water)

Price Emotions before watching video

Emotions after watching video

Least Paid $0.50 Happy Exhausted and

overwhelmed

Sad, cried and wanted to call father.

Missing father who passed, crying and more overwhelmed.

Most paid $4.00 Stressed out and anxious

Depressed, sad, and crying

Figure 3.

Item B (Google water

bottle)

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Least Paid $0.00 Stressed, anxious

Hesitant

Sad, anxious, stressed, overwhelmed

PityMost paid $27.00 Happy Inspired

Figure 4.

Report Control Group (Neutral condition)

In the neutral condition, there were two participants who paid

the least amount ($0.50) for item A (Aquafina water). Both

Individuals showed different emotions before watching the neutral

condition video (Great Barrier Reef). However, after watching the

video, both participants reported similar emotions before pricing

the item. Between both participants who paid the least amount,

one individual reported that they were feeling happy before

watching the video then they felt calm after watching the video.

The other individual stated that they were feeling stressed

before watching the video but reported they were relaxed after.

Results for emotions and behaviors can be seen in figure 5. As

for pricing the second item, the same individual who paid the

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least amount for item A also paid the least amount for item B.

Another participant who paid the least amount for item B stated

that they were feeling stressed for a test before watching the

video. After watching the video, they reported that they were

still feeling stressed. This indicates that their emotions did

not influence how they priced item B. As for paying the most for

item B, there were three individuals who paid the same price

($20.00). Based on my observation, the participant who paid the

most for item A also paid the most for item B. This information

help raise the same question again, which is, does emotions

really influence ones financial decision or is it that

individuals have unconsciously developed a spending behavior that

determine how they spend. All results for item B can be seen in

figure 6.

Item A (Aquafina

water)



Least Paid $0.50 Fulfilled, happy

Stressed

Calm Relaxed

Most paid $10.00 Anxious and Relaxed

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stressed and interested

Figure 5.

Item B (Google water

bottle)



Least Paid $0.00 Fulfilled, happy

Stressed

Calm Still

stressedMost paid $20.00 Stressed

Stressed Anxious and

stressed

Calm Relaxed

and intrigued

Relaxed and interested

Figure 6.

Discussion

Results have indicated that the study partially supports the

hypothesis presented. When experiencing a sad feeling, on

average, individuals paid less for both items than what they paid

on average when they were feeling calm and relaxed. Based on the

research done by Cryder, Lerner, Gross and Dahl (2008), when

individuals are feeling sad they tend to devalued themselves

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which triggers an implicit desire to enhance oneself by spending

more money to acquire an item. The results of this study I

conducted show that when individuals are sad while focusing on

themselves, on average the price they would pay for an item is

less than what they would pay when feeling calm. This result

shows that there is a strong relationship between emotions and

making financial decisions. The question should not be if there

is a relationship, the question should be, can emotions

negatively and positively influence individuals spending

behavior? The next question researchers should raise is; does

emotions really have any influence on one’s financial decisions

or have people unconsciously developed a spending behavior that

is irrational? This information is very important because

learning if one’s emotions or development of irrational spending

behavior can determine the reason why people are in debt, why

they gamble or they become addicted to spending. I predicted that

emotions can positively or negatively influence an individual

financial decision. Based on the result I found in this study,

individuals who shared the same emotions had different spending

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behavior and individuals who had different emotions had the same

spending behavior. This indicates that emotions alone cannot and

should not determine the reason why individuals make the

financial decisions they make.

There were a few Limitations in this study. One limitation

was not having enough time to see the difference between other

emotions such as anger, being upset, being disgusted or feeling

happy. Another limitation was that some participants were

involved in other experiments, which could influence a bias

response when choosing a price for an item. The fact that

participants knew that they would be involved in more than one

experiments may cause them to give responses they think would

benefit the researcher rather than giving response that would the

accurate. Another limitation was that I lack the resources

previous researchers used to conduct the study before. Another

limitation was that the sad video was a commercial for an

insurance company and based on the comments I receive in my data,

some individuals did not approve of being sold insurance by a

commercial. Such views can create a bias response to selecting a

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price of an item as well. Another limitation was the brand of the

items I used. Some individuals may favor different brand of water

and water bottles than the ones I used. I think researchers need

to conduct more studies to determine what causes individual to

spend the way they spend rather than believing emotions alone can

influence individuals spending behavior. This information can be

useful for consumers, market makers and suppliers of goods and

services.

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Reference:

AmazingLife247. (Producer) (2013). This is the saddest commercial you'll

ever see [Web].

Retrieved from http://www.youtube.com/watch?v=EEYm2zA7h_k

Cryder, C. E., Lerner, J. S., Gross, J. J., & Dahl, R. E. (2008).

Misery Is Not Miserly: Sad and

Self-Focused Individuals Spend More. Psychological Science (Wiley-

Blackwell), 19(6),

525-530. doi:10.1111/j.1467-9280.2008.02118.x

Lerner, J. S., Li, Y., & Weber, E. U. (2013). The Financial Costs

of Sadness. Psychological

Science (Sage Publications Inc.), 24(1), 72-79. Doi:

10.1177/0956797612450302

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National Geographic. (Producer) (2009). Exploring oceans: GreatBarrier Reef [Web]. Retrieved

from http://www.youtube.com/watch?v=wbNeIn3vVKM

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Paying for your sadness

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