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Samantha Smith

I think that reading this paper at this point in the semester was a great idea. I think that as a class we are all familiar enough with Behavioral Economics to have either heard of the experiments in Rick and Loewenstein’s literature review or at least understand them. Even though we have been learning about emotions and behavioral economics for about 6 weeks now, I am still mind blown by so many of the contributions of the discipline.

What I find most interesting/funny about Behavioral Economics (which was reinforced about 50 time throughout the paper) is that the results of most experiments have “obvious results.” These results aren’t obvious because I am a super genius economist, but rather I am a human being with emotions just like those in the experiments. Often times when learning an economic model for the first time, you cannot predict all the shifts and outcomes until your professor explicitly states the answer, but in behavioral economics that is rarely the case. For example, in the section about decision-making under risk, the paper relaxes the “assumption that utility is strictly defined over realized outcomes.” The example in the paper is, “suppose you anticipate a pay raise of $10,000 and subsequently receive a $5,000 raise. Although the raise is a gain relative to the status quo, you will likely code it as a loss, since it fails to meet expectations.” Another example is the importance of emotions and their influence on risky decision-making. We spoke about this Ariely example in class. It seems as though when you are sexually aroused you understand the risk of using or not using a condom, but you are less likely to use one in that moment. I think that the MTV show Teen Mom more real life proof of emotions and risky decision-making. Other examples, including the fact that you are more likely to delay a good thing and not a bad- the “save the best for last mentality” was another “obvious outcome.” These “obvious” outcomes are only obvious because we see people behave in these ways everyday in our lives, even if they aren’t in a controlled experiment. I think that behavioral economics is a very important growing discipline and that this paper helped to reveal that people breaking most assumptions should be an assumption.

Morgan Moskal

I agree with Sam on her thought that these results are not so obvious. I question these obvious results in the section of this paper regarding regret aversion theory on saliency for the possibility of regret. In this example Scott Rick and George Lowenstein try to make the difference between Gamble A and Gamble B more salient by changing the respective gambles to Gamble A’ and Gamble B’. When this change happens, Rick and Lowenstein have added colors in order to keep the odds for each color the same, even though the result of drawing a specific color is different between the two gambles. I don’t think this actually makes the difference between the two gambles any more salient. By adding the color Blue to the two separate gambles, it creates confusion (due to redundancy of having more than one color that will produce the same result as another) that might cause the subject to think longer about the choice. Instead of making the choice between the two gambles more salient, I think this experiment actually causes the subject to think longer about choice and eventually make a smarter choice.

Tommy McThenia

I particularly enjoyed the intuition cited in the Bechara et al. (1997).
This study created a game with 4 decks of cars, 2 considered high risk-high return and 2 considered safer. Bechara noted that individuals who incurred heavy losses were immediately more cautious and avoided the higher risk decks. This idea of loss aversion and immediacy bias has come up time and again in our studies of behavioral economics. It seems to me though that most people are unaware of of their own tendencies to exhibit this pattern of behavior...
The Bechara study also found that individuals with damage to their VMPFC resumed risk taking more quickly than those who had no damage. Bechara reasoned that these individuals were aware of the risk but "failed to experience fear when sampling". This sort of analysis makes so much sense to me that I am amazed that classical economics has not tried to reconcile with these integral emotions. I can think of plenty of instances in my own experiences where I've done something I knew I shouldn't have b/c of an overriding emotion (or the lack thereof). When combined with the idea that probability weighting is non-linear (as shown by Kahneman and Tversky), we understand that our own biases create and the strength of emotions play a huge part in the choices we make...
Thinking about all this made me humbled and gave me a new perspective on judging the decision of others. I was reminded of our discussions of how high stress can lead individuals in poverty to exhibit risky decisions repeatedly. You never know what someone is going through or how their situation is impacting their psyche, and I feel like many of people's "irrational" choices could be understood if we looked beyond the surface. Perhaps these individuals recognize the risks involved but emotional scarring or constant negative emotion dulls their ability to act in their best interests.

Tommy McThenia

^*deck of cards.

Blair Tynes

I really enjoyed reading this paper and think that it did a great job of summing up a lot of the information that we’ve been talking about throughout class. From one of our class discussions, I remember the bit about instant emotions creating a dynamic range of tastes and preferences. I believe that this article only reinforces that idea. I like how the authors point this fact out with the hypothetical stock purchase that Laura made on page 139. In this example, her preferences are entirely dependent on what she feels in the present, which contradicts traditional economic theory stating that preferences depend on expected utility gains.
Nearly all of the experiments cited in this chapter present findings suggesting that current emotions can drastically affect current decision making. I especially liked the Johnson et Al. study where the participants were more likely to pay more for terrorism insurance than for insurance that protected against “any reason.” Rationally this decision does not make any sense, as one would assume that terrorism should be included in the “any reason” category. In this case, emotions played a large role in changing that decision. I can see a similar reaction a type of experiment and reaction involving protection against shark attacks in the ocean, when statistically they’re rare. In each of these cases some perceived negative image of the emotional outcome swayed/would sway the decision. It could be fear invoked by a personal connection to terrorism or a news image of a terrorist attack. The idea that an emotional attachment can change tastes and rational decision making seems very intuitive as Sam stated, but it becomes very interesting when applied to traditional economics.
I believe that this can be related to most college students in the act of purchasing beer. Sure, in theory I prefer to drink Bud Light. But when I go into the store, and all of those options are in front of me, with each option evoking different emotions, I find that I only purchase Bud Light on occasion. This could be attributed to many different reasons, including price, available spending money, or the premium that American consumers place on variety, but it is interesting nonetheless.

Austin Pierce

Like everyone else, I really enjoyed the paper. However, as I have said all semester, I feel like a lot of the insights from these studies can simply be applied to the neo-classical structure. Id est, ceteris paribus, (using > to denote preference) if A > B and B > C then A > C. Emotional states aut alia fall under the auspices of the "ceteri."

However, one thing that I really enjoyed reading about in this article was the idea of incorporating expectations and non-realized outcomes into the utility function. Exempli gratia, if one expected a raise of $X and only received $(X/2), then one would be much less excited, and the negative surprise could even drive the overall change in utility negative...although that would seemingly be irrational.

The example about delaying good things and "quickly get over with" the bad things strikes up a particular question/model in my mind. I would think that this relates to humanity's loathing of the unknown, loathing of dread, and desire for hope. People like to know what is going to happen to them. It lets us order our world and brace ourselves for things. Thus, if we can know that the future will be good, it is not surprising that we will save ourselves the anxiety by postponing the good events. By postponing the good event, if they can guarantee enforcement of the scenario, they know that the future holds something with positive utility, and they are not anxiously awaiting the results.

However, postponing a bad gives one a sense of dread. Knowing that the results are negative gives a negative now and then; whereas not knowing only gives a negative (anxiety) now.

Thus, the matrix would be:

Future Results Now Later
Unknown: (-) (+)
Known Good: (+) (+)
Known Bad: (-) (-)

Therefore, if one could control the outcome of future events in some manner (such as by paying for an unbreakable/nearly unbreakable contract), it would seem that postponing a good event would stochastically dominate.

Granted, I must admit I always have a hard time with these articles, as although I'm decently good with empathy, sometimes I read an experiment and say "How could anyone make choice X?" I would be interested to see if people who more consciously incorporated neo-classical economic and logical axiomata into their decision making had different responses in these types of experiments and whether there was any neurological basis for it.

Paul Reilly

Maximizing utility under the consequential theory implies that everyone can evaluate perfectly all options and accurately choose their best outcome. Unfortunately, I can barely figure out how much 20% of the tip at Macadoos is at lunch... Happy Hour is simply a toss up. Is my impartial spectator on the fritz?

I question the studies ability to single in on one particular emotion. The process to experience fear could be impeded or amplified by different chemicals in the brain. When looking at a single decision to buy a stock, most people do not decide to purchase a stock in a finite setting. A person may be on the search for somewhere to park their savings for several months. Even with that month worth of research, any asymmetries of information fly in the face of consequentialist theory. Your local plumber might not know that bond prices are inversely related to yield. The emotions of fear, expectations of when you will need the money, etc all impact this one decision. Another idea is that despite all of the analysis put is, the plumber may have already chosen what stock he wants to buy before he consciously chose.

This article provided a nice review of the course. One implication may be that before making key life decisions (investing/loaning funds) it might be good to stop and remind employees frequently that what they are doing can be impacted by their current state. Reducing stress levels in the workplace could be one such way to improve decision making.


I agree with much that has already been said above, particularly with regards to the “obvious results.” This is certainly a paper that is a good connecting point for everything we’ve talked about in class up until this point. However, the many comments about the common sense of the experiment results got me thinking back to uncovering the real Adam Smith. Smith is a name associated with the invisible hand and not much else. But as we learned in the first few days of class, Smith was in fact a behavioral economist, not because he had fMRI machines or advanced neuroscience, but simply because he was human. In agreement with Sam, it’s kind of cool that we can now take these common sense human emotions and tie them to economic choices and models.

What I found most interesting about the article (which I believe may have also been touched on above), was the idea of opportunity costs in decision making. Opportunity costs are one of the basic concepts we use in economic models to explain why an individual chose buying the new Taylor Swift album over something else (One Direction, maybe?). But in reality, do consumers actually think that way? I’m referring to the example about the $14.99 video: on one occasion the question is phrased as “not buying this entertaining video” or “keeping the $14.99 for other purchases.” Results of the experiment showed that drawing attention to opportunity costs significantly reduced the proportion of individuals willing to purchase the video. This section of the article reminded me of our conversations about “framing,” particularly with relation to the survey work I did in Belize with Professor Casey. While the class didn’t contribute to the creation of the surveys, it would have been a very interesting exercise as how a question is framed could determine how it is perceived and thus responded to.

Julia Harbaugh

I really enjoyed reading this paper and learning a little bit about the many experiments mentioned throughout. Similar to Sam, I thought the “obvious” outcomes actually exposed how irrational we are. We are economically irrational because we discount incorrectly and put an overemphasis on loss. However, I personally understood the subject’s responses and actions in the experiments because when putting myself in their shoes I would probably respond the same way (…irrationally).
The experiments on spending and consumers were particularly interesting to me. Specifically, I am very curious about the mechanism behind the spendthrift vs. tightwad. Of course it made sense to me that tightwads felt excessive pain when spending while spendthrifts experienced too little. However, I don’t entirely understand the emotional aspect- “as predicted, tightwads spent more when sad than when in a neutral state, and spendthrifts spent less when sad than when in a neutral state.” As a spendthrift when I feel “bad” or upset I generally do not treat myself with a shopping spree- but the reason I feel bad is probably because I already spent too much money that month. So my actions are in accordance with the study, but I would assume that most spendthrifts would want to treat themselves to feel better. In reference to tightwads spending more when sad- do they already feel so poorly they just don’t even care and will spend more? I would think spending would make them feel even worse, but maybe they’ve passed a threshold of pain that they actually experience less pain than when in a neutral state…? This is one study I don’t entirely understand the rationale behind the individuals.
I looked more into the pain of paying research by Cynthia Cryder (Rick et al 2008) and came across a few interesting findings. Spendthrifts were more sensitive to the framing of questions and the pain inflicted through spending. One study they asked tightwads and spendthrifts if they would be willing to pay either “$5 fee” or “small $5 fee” for shipping, Tightwads were significantly more likely to pay the “small $5 fee” while spend thrifts were completely insensitive to the manipulation.
I think environment also must play a significant role in the development of an individual as a spendthrift or tightwad. As the youngest of 4, I am definitely more spoiled than my siblings and have more spendthrift habits in comparison. It would be interesting to see how people that come into wealth may change. If they have a tightwad past, how likely is it for them to shift to a spendthrift?
Overall, I found the paper really interesting and effective in explaining the interaction between immediate and expected emotions.

Curtis Jay Correll

Wow. There was a lot going on in that paper. It recapped much of what we’ve learned this semester while also introducing some new concepts and studies.

I found the study on flight insurance versus terrorism insurance for flights to be particularly interesting and effective at demonstrating the authors’ point regarding integral emotion. Insurance against all potential airline risks commanded a lower willingness to pay than insurance only against terrorist attacks. This is of course because the mention of terrorist attacks gives people a very definite and emotional response. This fear would make people more likely to want to purchase air-travel insurance. I would be interested to see this study expanded to see how much more, if any, insurance against all incidents would sell for if terrorist attacks were specifically mentioned as being among the possibilities.

I found the study that amended our views on discounting to interesting as well. They used the positive result of kissing a celebrity and the negative thing of having a non-lethal electric shock. The fact that people would value the positive result higher down the road but a negative thing more negatively in the long run was somewhat intuitive, but I was interested to see that the results were so strong. I think this result is likely somewhat a product of nurture. We are taught from a young age to savor good things and to get the hard things done first. We naturally want to see constant improvement in our lives, so it makes sense to get the bad things out of the way and enjoy the good things later.

Daniel Molon

I enjoyed this article as a cursory introduction to a variety of concepts studied in behavioral economics. The section about relatively stable happiness for lottery winners, paraplegics, and a control group is very interesting. This helps show the malleability of people’s tastes and preferences. This is explored in one of Dan Ariely’s works, in which he explores what people find attractive. He found that the traits that a person finds attractive is dependent upon that person’s own desirability, and that changes to their desirability leads to changes in their tastes of what they find attractive.

Another section I found interesting is the one on people’s faulty assignment of probabilities. I recently read about Kahneman’s farmer and librarian experiment, in which he would describe a person asked participants what the most likely scenario for that person was. People would routinely choose an obviously less likely scenario based off of the description, and would even argue with him when he revealed the more likely result. The way outside factors can influence people’s understanding of events’ probabilities makes me wonder how often mistakes like these are made.

I also found the section about the video and people not actively considering opportunity costs to be interesting. I read the article that this section is based off of and found their results to be fascinating. The performed another related experiment in which participants had $400. They then offered an iPod for $300 or an upgraded iPod for $400. In the other scenario they included that the $300 iPod left them with $100 leftover. The inclusion of that simple statement doubled the number of people who purchased that iPod. What I find interesting about this, and they talked about in their article, is the influence this means salespeople and advertisers have in people’s decision making. Simply by reminding people of the difference in costs between two items and the way you word this reminder, you can double the likelihood they will purchase an item.

Sommer Ireland

I'd say that I agree with a majority of what has been written above. Though I think Julia had an interesting point about the irrational decisions of supposedly rational beings because I too can relate to the decisions of those in the tests. So with this relatively new field of neuroeconomics where you combine neuro, econ, and psychology, why is it that we revert to the standard economic definition of what is a rational choice and what is not? I'm not a psychologist or a neuroscientist, but if enough people would choose the "irrational" choice, would it still be irrational?

As far as the experiments in the paper go, while all were interesting, I found the decision-making while aroused one particularly fascinating. Particularly because as a current college student I know from others that this isn't uncommon. While I know that males are much more likely to be risk takers than females and thus probably better for the experiment, I still think it would have been interesting to know a college woman's response to the "Heat of the Moment" experiment. The risk attitude vs. risk perception outcome of the experiment is very enlightening though, but it makes sense. I wouldn't expect emotions to change how I perceive the risk of skydiving, but my attitude towards the risk would definitely change based off of my emotional state. If I was in the plane and fearful of the jump, my attitude towards it would be much more different than when I experienced the excitement of initially buying the ticket.

I have to agree with Paul about singling out emotions though. Honestly if you asked me about my emotional state, 90% of the time I wouldn't be able to pinpoint just one emotion - usually it's a clusterfuck of them. The other 10% of the time I would probably distinctly be able to say that I'm sad because that seems to be one emotion that I will experience in and of itself. I know in the paper it remarks about how we are so sensitive to loss. And I know that I have a much easier time remembering the bad memories than the good ones. I would say that negative memories and this easily definable emotion of sadness play heavily into loss aversion decision making. I'm no neuroeconomist, but I think that'd been an interesting area to study.

Jennifer  Friberg

This article was a great culmination of a lot of topics and experiments we have covered so far in class but also added additional findings in the field of behavioral economics. It is fascinating to see how much actual decision making deviates from the basic models we learn in econ 101, 102, and even the upper level econ classes. Rottenstreich and Hsee's suggestion in regards to affect-rich and affect-poor decision really caught my attention. It is yet another example of an "irrational" choice in terms of classical economic theories yet I would absolutely respond in line with the participants in the study.

Rottenstreich and Hsee suggest that the probability-weighting function would be flatter for affect-rich outcomes versus affect-poor outcomes. In the study, the affect-rich outcome is enduring an electric shock and the affect-poor outcome is losing $20. They found that the WTP to avoid an electric shock was highly insensitive to the probability of the shock when the WTP to avoid losing $20 was very sensitive to the probability of the outcome. This shows that when a highly emotional outcome (affect-rich) is at stake people tend to act out of accordance to typical decision making processes, which usually take into account the probability of the outcome to actually occur. When reading about studies like these in an economics class it is easy to see the way people should "rationally" decide their WTP in these two situations but this is when we are thinking in a focused mindset displaced from the actual emotion of the decision. When greater, more overwhelming emotions, such as hope and fear, are experienced I think we can all agree that our WTP may be slightly "irrational" when it comes to avoiding an electric shock or anything else slightly terrifying...

This experiment, as do many others in the field of behavioral economics really challenges the general notion of "rational decisions". Many of the classical economic models would view the participants in a lot of the studies mentioned as irrational decision makers, however, these are the actual decisions people are making. This articles really highlights how necessary it is to take into account immediate emotions, both integral and incidental, when predicting individuals' future choices. The definition of rational choices really does need to include emotional responses, since humans are born and often times are influenced by their emotions.

Bayan Misaghi

This was a great summary of what we have learned and discussed so far along with a discussion of how far the discipline has yet to go in order to sort things out. In explaining integral emotions, the article alludes to the fact that individuals have virtually no idea what their tastes and preferences are until they are faced with a decision that they have to make. Dan Molon mentioned this in his “malleability of people’s tastes and preferences” comment. And the article describes several studies that show that decisions are oftentimes made “illogically” (e.g. paying more for only “terrorist” insurance rather than “any reason” insurance), perhaps because the individual is unable to even imagine potential scenarios or full identify his/her own tastes and preferences.

The integral emotion paradigm basically flips utility theory on its head. Rather than assuming an individual comes into a decision a priori with static tastes and preferences (how a typical microeconomic theory course is taught), perhaps economists should think about the decision event itself dictating and revealing an individual’s tastes and preferences. Of course, this is the goal of countless studies: revealing an individual’s normative preferences. However, classical studies may not take into consideration framing, hyperbolic discounting, the endowment effect, etc.

Comparing the pleasure-pain paradigm (Relaxing the Assumption That Utility is Strictly Defined over Realized Outcomes) and the hyperbolic time discounting (Relaxing the Assumption of Exponential Discounting) was perhaps most interesting to me. Individuals were willing to pay more to experience delayed pleasure (e.g. kissing a celebrity) yet would choose a $10 Amazon gift certificate today over a $15 Amazon gift certificate tomorrow. I find this to be contradictory. Given hyperbolic discounting, I would expect that in both cases individuals would choose to be rewarded sooner rather than later—especially in the first case, since the individual is only being rewarded with one kiss whether it is 1 minute from now or 1 year from now. I hope that we can discuss why both of these phenomena are observed.

Lucy Ortiz

As mentioned many times in the previous comments, this article was a great summary of many of the various ideas we have discussed so far. It was interesting to read another author's interpretations of the various theories and hear them explained other ways.

One of the main things that sticks out to me when doing reading for this class is how, like we've discussed, neuroeconomics is so tightly intertwined in so many other disciplines. Quite a few of the papers described in this article and our text book have been used in some of my other courses, mainly education and development psych. Specifically, we watched the video of Mischel's 1974 study of the impact of physical promximity of rewards on the impulsivity of children. Rather than discussing the diminishing utility of future marshmallows, we focused on how the various children reacted to the situation. Some of the kids turned completely way, some played with the marshmallows, some closed their eyes, and some even just smelled the marshmallow in front of them. Understandably, the kids that allowed themselves to smell and touch the marshmallows were much more likely eat the first one. The one thing that stood out the most though, was I believe that the older the children were, the more likely they were able to hold out for more marshmallows. This just made me wonder about how as we develop our preferences for future versus present rewards changes. Is it accurate to say that as we get older we are more likely to value future rewards higher? Is that only true for the early stages of development?

On another note, the study of "lowbrow" versus "highbrow" movies really intrigued me. What are the short-run versus long-run benefits of these movies? This just seemed rather subjective to me. Do people feel like they will want to watch one of the intense movies in the future but one of the easier to watch movies now? Or is it just the benefit of saying that they would potentially like to watch one of these prestigious movies in the future that propels the participants to make these claims?

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