In this blog post, we explore how sadness influences consumption and why we open our wallets more when we’re sad, using psychological experiments.
When you swipe your card, your brain gets tricked!
Another factor that encourages overspending is the credit card itself. Some might wonder what the emotions driving our spending have to do with cards. The answer lies in the changes that occur in our brain when we use a card.
Generally, when we spend cash, our brain feels pain. This is because we perceive it as the loss of an important asset we possessed. However, when we use a card, the part of the brain that senses pain becomes numb. With cash, you’re unilaterally giving money away. But when using a card, you’re essentially exchanging an object (the card) and getting it back, so our brain tricks itself into not perceiving it as a loss. Functional MRI (fMRI) scans showing brain activity indicate less pain when paying by card than with cash. Ultimately, this means less guilt, leading us to keep spending. Let’s hear Professor Kwak Geum-joo from Seoul National University’s Department of Psychology explain.
“Truthfully, when we overspend, we feel pain. But the brain’s pleasure center feels joy when we acquire something we desire. Momentarily, this pleasure center activates, but ultimately, we turn around and feel the pain. Credit cards are precisely what lessen this pain. Right now, I’m not paying a large sum of money, nor am I handing over cash. Because cash isn’t leaving our hands right in front of us, our brain allows us to consume without feeling any pain at all.
When spending money, the pleasure center normally becomes less active, while the pain center becomes more active. That’s why we hesitate when making purchases. But when we spend with a credit card, only the pleasure center is activated. Therefore, credit cards can be seen as causing overspending.”
Sadness is the cause of overspending!
Another emotion that fuels consumption is sadness. Harvard University’s ‘Decision Science Institute’ researches theories on emotions and decision-making. Specifically, Professor Jennifer Lerner conducted a fascinating experiment on how sadness influences consumer decisions.
First, people were divided into two groups. One group was shown a video of peaceful scenery, while the other group was shown a video with sad content. Afterwards, they were shown a plastic bucket and asked how much they would pay for it. Those who watched the peaceful scenery offered an average of $2.50, while those who watched the sad movie offered an average of $10. Why did those who watched the sad film offer to pay four times as much?
Let’s hear from Jennifer Lerner, Director of the Harvard Decision Sciences Institute and Professor of Public Policy.
“Without realizing it, when people experience heartbreak or sadness, they crave possessions more intensely than usual and are willing to pay more for them. What’s fascinating is that this process is entirely unconscious. It stems from a sense of emptiness, and the most crucial theme linked to sadness is loss. The feeling of loss is deeply wounding. And without realizing it, we develop a desire to fill that void.”
In the experiment, when people who paid $10 for a water bottle were told, “You felt sad and paid more for the plastic item,” most reacted very negatively. They believed they had made a ‘rational choice,’ and being told otherwise upset them. This means they set the price entirely unconsciously. Professor Jennifer Lerner explains:
“One of the most fascinating aspects, I think, is that this process is not self-aware. In other words, the decision-maker themselves doesn’t realize that the emotions they felt while watching the video influenced their buying and selling prices. We always use real money in our experiments, so this isn’t just a theory. Sometimes we ask participants: ‘Could the emotions you felt while watching the movie influence the price you decide?’ Most react with displeasure. They react with something like, ‘How could you see me as such an irrational person?’ They genuinely don’t realize it.”
When predicting consumer behavior, sadness becomes a crucial trigger. This is because when humans experience the emotion of sadness, nearly identical physiological responses occur without exception. Typical examples include fingers getting cold or an increased heart rate. This holds true for Americans, Papuans, and Koreans alike. The causes of sadness may differ, but the physical reactions it produces are almost entirely identical. Crucially, when this emotion of sadness combines with the ‘endowment effect,’ the opposite phenomenon occurs, altering decisions about price.
When something precious is lost, we want to replace it with something new!
The ‘endowment effect’ is a common bias in human judgment and decision-making. Once we own something, we tend to value it much higher. Consequently, if we have to sell it, we demand more money. The University of Chicago conducted an experiment on this.
One group of students was randomly given mugs, and an auction market was set up. Students who received mugs were asked, ‘How much would you sell that mug for?’ and told to write down their price. Students who didn’t receive a mug were asked, “How much would you pay to buy that mug?” and asked to write down their answer. Students willing to sell the mug said they would sell it for an average of $5.25, while students wanting to buy it said they would pay an average of $2.75. Why this difference? In this situation, students wanting to sell don’t need to assign great value to the mug. It wasn’t a gift from someone special, after all. It had just been randomly placed on their desk for about two minutes.
This experiment shows that when people acquire something, they immediately tend to increase its perceived value. This is a bias inherent in the human brain. However, the emotion of sadness produces the exact opposite effect of this ‘endowment effect’. Let’s hear again from Professor Jennifer Lerner.
“We hypothesized that sadness would have the opposite effect of this endowment effect. There are several psychological theories about the emotion of sadness. One is that it creates a desire to change one’s environment. There’s an American expression: ‘Out with the old, in with the new.’ This is precisely the effect sadness produces. Sadness also causes people to focus on the self. They become self-centered. Sometimes it can lead to excessive rumination—constantly rethinking the same thing. The endowment effect is the phenomenon where people demand a higher price when selling something than when buying it. Sadness produces the opposite effect. When people are sad, they tend to sell their possessions for less than usual. And when buying things, they tend to pay more than usual.”
Summarizing all experiments to date, consumption is never purely rational or logical. Instead, it is heavily influenced by emotions. Sadness, anxiety, depression, and loneliness drive more spending, while external factors like credit cards alleviate the brain’s pain, leading to increased consumption.
