exam 2 Flashcards
what do people value (mental accounting)
time, money and resources
what is the sunk cost effect
the tendency to continue an endeavor once an investment in money, effort or time has been made
what are some examples of the sunk cost effect
relationships, finishing a terrible movie, continuing a bad paper, eating expired food
what does the study of movie theatre tickets say about the sunk cost effect
people who pay more or full price for tickets tend to go to things more than people who pay less, even if they don’t want to go
what is the prospect theory
losses loom larger than gains, with a gain that is the same size as a loss you have a less extreme feeling
what is the escalation of commitment
throwing good money after bad money, I’ve already spend money so why not spend more to get the desired outcome?
how can the prospect theory be applied to sunk cost theory
we can justify paying more if it will then potentially result in an anticipated outcome (to avoid a loss)
how can we get away from the sunk cost feeling
sunk cost has greatest impact near the time of expenditure
as time goes on the effect is less apparent or nonexistent
is the sunk cost effect rational
no, it is not rational to let the sunk cost determine future behavior
what is transaction utility
value is directly related to how good of a deal you think a price is, given the specific context you are in at that time
in other words, buying something and thinking you got a good deal
what is an example of transaction utility
buying an expensive shoe at bloomingdales is justifiable, but it is not justifiable buying an expensive shoe at target
what if you didnt know where a product came from
(assessing the quality of a product without an associated price) we tend to infer value and price based on the brand and context/location (ex. Olive Garden vs fancy italian restaurant)
explain the wine tasting experiment
can we experience different levels of pleasantness or satisfaction based on the perceived price of a good
1) tasting of 3 different wines one retail price ($5), one $90 and the other $35, there was a price mark up for the cheap wine and a price mark down for the expensive wine… told the cheap wine was $45 and the expensive wine was $10
2) wine tasters assigned rating to wine (1-4) once given the prices of the wine and once without being given the prices of the wine, experts and novices were both tested
3) positive correlation in experts between cost and taste, negative correlation in novices between cost and taste
4) how much people were told the wine cost influence how much they reported liking the wine (pleasantness is correlated with wine prices)
what is an FMRI and how was it used in the wine tasting study
takes baseline of brain data and then takes brain data during the event and sees the difference
the part of the brain that responds to “experienced pleasantness” was more active when drinking wines priced higher
why do people spend more money on a coke at the movies
because it’s all about the experiences so you feel compelled
at the movies (S,M,L) are all closely priced to make you think its not that much more for the large, makes people think it’s a good deal (transaction utility)
what is an example of the economic demand curve
cigarettes used to be $1 but now they are $10 because people will still buy them
what are the two misconceptions of scarcity creating demand
1) that scarcity = quality
2) and reactance, we want what we can’t have, in other words we have to have things before they’re gone “while supplies last”
an example of this is iPhones, they release less quantity than demanded so people want them before they’re gone
what is the discrepancy between buyers and sellers
willingness to pay (buyers) vs willingness to accept (sellers)
what is the willingness to accept
what is the minimum price you would be willing to sell an item (greater than willingness to pay)
what is the willingness to pay
what is the maximum price you would be willing to buy that item
what is an example of the WTA > WTP (in class)
in class: asking to sell or buy extra credit points, WTA was higher
what is the endowment effect
ownership creates satisfaction, people value an object more once it becomes theirs
ex. people believe their houses are worth more than they already are (same with selling personal items, WTA > WTP)
what is a study that demonstrates the endowment effect
class 1: given mug, asked if they wanted chocolate, 89% chose mug class 2: given chocolate, asked if they wanted mug, 10% chose mug class 3: given choice, 59% chose mug
shows that people have a strong preference for what you already own, most desirable item is what you have
what is an example that shows how the endowment effect doesn’t make sense
you put an item for $5, do you sell it for more, less or the same?
most people will say more, even though it makes no sense
what is the pseudo-endowment effect and examples
you don’t even have to own an item for the endowment effect to affect you
ex. handling an item at the store and not buying it
ex. temporarily being the highest bidder makes you feel as though you have ownership of that item; therefore, makes you more likely to bid again if you “lose ownership”
what is the auction fever article and what variables were manipulated
different items people bidded on (t-shirts, chocolate, gift cards)
manipulation:
1) bidding/endowment time (long= 9 rounds vs short bidding period = 1)
2) competition (high= 20-35 competing vs low= 3-5 competing bids)
people in the bid longer with more competition spend more money on the final bid
what was the psychological consequences of $ article studying
are the effects of money on behavior primarily positive or negative? the idea was that money is a catalyst for feelings of self-sufficiency
how did they prime people in the psychological consequences of $ article
primed with monopoly money, word primes (neutral v. money related), or reading essay about rich people or poor people
how were the subjects tested in psychological consequences of $ article
1) time spent on problem solving task before asking for help
2) experiments for helping others
3) experiments for working together
what were the results of people doing the problem solving task in psychological consequences of $ article
people primed with money did the task longer before asking for help (more self-sufficient)
what were the results of people helping others in psychological consequences of $ article
people were asked to volunteer to code data sheets, help a peer do a test, help someone pick up pencils, and donate money
in all of these cases people primed with money helped less
what were the results of people working together in psychological consequences of $ article
physical distance between partners, number of solidarity activity selections, proportion of participants who opted to work alone
people primed with money sat farther apart, selected more solo activities, and chose to work alone
what is the overall conclusion of psychological consequences of $ article
when people are primed with thoughts of money they tend to act in ways that reinforce the idea of self-sufficiency
explain how dowsing rods help people “find water”
these do not actually work but people will say it words because of subconscious micro movements and the power of persuasion, we are persuaded by things all the time
Dr fortune did this experiment in her class and showed an albert einstein quote, explained how dowsing rods worked and they did
what three things influence the success of persuasion
1) receivers traits
2) senders traits
3) message content
what influences a senders traits
is the sender credible? depends on the context, credibility of a person may not be universal, but context specific
is the sender likable? how likable someone is can influence how likely you are to believe their message (similar, trustworthy, attractive)
what influences the quality of a message content
fear appeal v. logic are the two different approaches to making persuasive arguments
ex. smoking commercials with stoma (hole in neck) causes fear, smoking commercials about smoking money away is a logical argument
how can we ensure that a fear campaign works
1) be aware of consequences
2) given a realistic, workable solution, if this is not done people can feel helpless and might act in the opposite way than intended
what influences the receivers traits
1) the need for cognition
2) expectations
3) pre-existing beliefs
explain the need for cognition (receivers traits)
variable that shows how much people think about information, people with need for cognition are more likely to be influenced by high quality arguments
explain expectations (receivers traits)
how likely you are to be persuaded is influenced by knowing if the intention is to be persuaded
if you know you are going to be persuaded, you are less likely to be persuaded (to be forewarned is to be forearmed)
explain pre-existing beliefs (receivers traits)
already agreeing with something, you are more likely to be persuaded
what decides when a one sided or two sided argument will be more persuasive
depends more on your previous beliefs and on the context
when will one sided arguments suffice
when you already agree with the side of the story or you have no knowledge in the content area
what is disconfirmation bias
it is harder to persuade with incompatible views, spend more time finding fault with incompatible views
thoughts related to disconfirming evidence are better than thoughts related to confirming evidence
when are two sided arguments better
when you initially disagree with the presented point of view
the audience knows there is another side not being presented
what are the two kinds of routes you can use when trying to convey a persuasive message
central or peripheral
what is central route processing
more of a controlled process, persuasion based on message content
