Feelings vs. Rationality

In class we have always assumed that a consumer or supplier is going to make the most rational decision when it comes to purchases or, in the suppliers’ case, production decisions. But that has been an assumption we have made to simplify the concepts we have talked about because there are so many different factors that play a role in economics that if we took them all into account, the class would then no longer be an intro level class. One of these factors that we disregard for simplification is how we feel.

In an ideal world, economists would say that the consumer’s and supplier’s goal is to maximize their respective surplus. This would mean that regardless of outside factors we would choose the most profitable choice. But this isn’t always the case. Think about the market for smartphones. You can confidently say that the iPhone dominates this market in the U.S. Why is this though? Android phones are a main competitor for iPhones in the smartphone market yet they are not very prominent. Looking at ads for both of these phones side by side tells us something about the choices we make.

A typical ad for an Android smartphone.

A typical ad for an iPhone.

The difference that I would like to point out is that the ad for the Android phone has information about the phone which corresponds to the phone’s performance and capabilities while the ad for the iPhone does not; it has no information about the performance of the device whatsoever. So our intuition would lead us to think that the obvious choice would be the Android since we are given information on it and we are given none on the iPhone. Yet there’s a larger amount of iPhone buyers than Androids. Some economists claim this to be the result of our emotions and prejudices. Because of the brand and the prejudices we have, we feel that we are better off buying an iPhone even though the Android is apparently the better phone. We do this because “emotions are the primary reason why consumers prefer brand name products” (Murray).

A study was done by marketing professor Raj Raghunathan and Ph.D. student Szu-Chi Huang where they showed participants photographs of a pretty chicken and an ugly chicken.

Pretty chicken.

Ugly chicken.

The participants were told that the pretty chicken was naturally raised and the ugly one had been genetically engineered. The researchers told half of the participants that natural chickens were healthy but less tasty, and genetically engineered chickens were tasty, but less healthy. The other half were told the opposite. Both groups of participants had a majority prefer the pretty chicken even though their reasoning was different. The first group said it was because they valued health over taste and the second group said it was because taste was more important. What this tells us is that the participants preferred the pretty chicken because of how they felt about the way it looked not because they had a larger preference over taste or healthiness.

Emotions can also influence the supplier side of the market. In another study done mentioned in “How Emotions Affect Decision Making,” the researchers found that even when a project or a plan is going badly for a manager, they will keep the project going out of anger because they predicted the plan would work even though it may be more beneficial to quit the project.

What these studies tell us is that emotions and feelings play a large role in our decision making and can sometimes cause us to make decisions that may not be what we would expect if we were depending solely on rational thinking.

Works Cited

Belsky, Gary, and Tom Gilovich. “Why You Should Shop For Cars When You’re Grumpy.” Business Money Why You Should Shop For Cars When Youre Grumpy Comments. TIME, 15 Dec. 2011. Web. 28 Apr. 2015.

Murray, Peter N. “How Emotions Influence What We Buy.” Psychology Today. Psychology Today, 26 Feb. 2013. Web. 28 Apr. 2015.

Palmquist, Matt. “How Emotions Affect Decision Making.” Strategy+business. Strategy+Business, 24 Nov. 2009. Web. 28 Apr. 2015.

Smith, Stacey V. “When It Comes To Buying Decisions, Why Feelings Come First.” NPR. NPR, 17 Apr. 2015. Web. 28 Apr. 2015.

Wenger, Dave. “Do You Make Buying Decisions Based on Logic or Emotion? A Tale of Two Chickens.” Do You Make Buying Decisions Based on Logic or Emotion? A Tale of Two Chickens. McCombs Today, 21 Apr. 2010. Web. 28 Apr. 2015.

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