Prof. Baba Shiv, one of our advi­sors, just pub­lished a fas­ci­nat­ing paper on the power of our beliefs to influ­ence brain acti­va­tion, and on how mar­ket­ing can influ­ence those beliefs:

Price Tag Can Change The Way Peo­ple Expe­ri­ence Wine, Study Shows (Sci­ence Daily)

- Accord­ing to researchers at the Stan­ford Grad­u­ate School of Busi­ness and the Cal­i­for­nia Insti­tute of Tech­nol­ogy, if a per­son is told he or she is tast­ing two dif­fer­ent wines and that one costs $5 and the other $45 when they are, in fact, the same wine the part of the brain that expe­ri­ences plea­sure will become more active when the drinker thinks he or she is enjoy­ing the more expen­sive vintage.

- “What we doc­u­ment is that price is not just about infer­ences of qual­ity, but it can actu­ally affect real qual­ity,” said Baba Shiv, a pro­fes­sor of mar­ket­ing who co-authored a paper titled “Mar­ket­ing Actions Can Mod­u­late Neural Rep­re­sen­ta­tions of Expe­ri­enced Pleas­ant­ness,” pub­lished online Jan. 14 in the Pro­ceed­ings of the National Acad­emy of Sci­ences. (Note: link here)

This Stan­ford arti­cle pro­vides an overview of his research: click Here.

- “The belief in the aca­d­e­mic field is that emo­tions are essen­tial to deci­sion mak­ing, oth­er­wise you’ll end up mak­ing bad deci­sions, Shiv says. “But, he adds, explain­ing his huge con­trar­ian streak, “I can show the oppo­site as well, that brain-damaged patients can make bet­ter deci­sions than nor­mal individuals.

- So what’s going on are emo­tions ben­e­fi­cial or detri­men­tal to good deci­sion mak­ing? There’s no sim­ple answer except, “It depends. But on what? In mak­ing choices, when is it bet­ter to think things through and when should you go with your gut? And given that we have both modes of deci­sion mak­ing at our dis­posal, why do we some­times give in to our impulses even when we know bet­ter, while other times we show more self-control?

- “For exam­ple, Shiv worked with Ariely (and Ziv Car­mon of INSEAD) on a series of stud­ies that found a strange price-placebo effect: When par­tic­i­pants bought an energy drink at a dis­count, they actu­ally per­formed worse on a puzzle-solving task than par­tic­i­pants who had paid full price for the same drink.”

Impli­ca­tion: per­haps we have to learn how to “placebo” our­selves at will, as part of effec­tive emo­tional self-regulation. And not to let mar­ke­teers con­trol our beliefs.

We asked Prof Shiv today for a prac­ti­cal sug­ges­tion to increase hap­pi­ness among drinkers of cheap wine: “Have retail­ers who sell lower priced wines to have tast­ing rat­ings of experts so as to divert atten­tion away from price to the rat­ings”, he suggests.

Feel free to exper­i­ment around this sur­pris­ing effect. In mod­er­a­tion, please.

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