Friday, March 19, 2004

Buyer Beware

"I know none of you would ever take advantage of someone in distress, so I can safely share this: If you are looking to unload an asset, be it a car or an eBay gewgaw, try to find buyers who are feeling sad, and stay away from those who are feeling disgusted, happy or even neutral.

If, on the other hand, you are looking to buy, seek out sellers who are sad or disgusted, but again steer clear of anyone too jovial.

In a provocative result from the new discipline of behavioral economics, scientists find that emotions that have nothing to do with the transaction at hand can influence what price people are willing to pay for something and what price they are willing to accept.

"We're showing for the first time that incidental emotions from one situation can affect economic transactions in unrelated situations," says Jennifer Lerner of Carnegie Mellon University, Pittsburgh. She and her colleagues will report their findings this spring in the journal Psychological Science.

Behavioral economics, which probes how psychology shapes the decisions people make in the marketplace, has mostly concentrated on cognitive processes. In one study, for example, researchers find that people are hardly the rational, logical decision makers that textbooks assume. If someone feels she has been cheated, and has a choice of collecting either $5 for herself and $5 for the cheater or nothing at all, she prefers to walk away with zero rather than see the cheater also collect."

--Sharon Begley, Science Journal column, 3/19/04