The Marketplace in Your Brain

Neuroeconomics came into being around the turn of this century, growing out of a critique of the basic idea in economics that people are driven by rational attempts to maximize their own happiness. A new breed of behavioral economists had noted that in reality, individual definitions of "maximize" and "happiness" seemed to vary. Neuroeconomists added the idea that, by mapping parts of the brain doing the maximizing and the happiness-defining, they could better account for those actions.

Through experiments, researchers have shown that when people reject a low, unfairly priced offer, a part of the brain associated with disgust kicks in, but that when they view the offer as fair, a brain region linked to reasoning seems more active. Researchers have also tackled the puzzle of "overbidding," when people pay too much for something. An area called the striatum, associated with rewards, is more active when people bid high in an auction because they fear losing an item, but is not as active when they think they have a good chance of winning. So fear of losing may be key to things like overvalued stocks.

There is a neuroscience trend at the moment. Not the scientific study, but the using of the research to justify and explain a multitude of behaviors. In this article by Josh Fischman for The Chronicle of Higher Education he delves into the world of neuroeconomics.

While some scientist believe that the research is unnecessary others believe that better understanding how the brain interprets transactions would help explain, among other things, why people that spend hundreds of dollars on a smartphone balk at the idea of paying more than a dollar for an app (while holding a latte on the other hand.)

In recent days I've had many conversations about pricing. Pricing performances, the person is basically buying the promise of quality and a good time. The pricing of one's work and how to determine one's value as an individual, team and company. And what is the pricing threshold between some being perceived as cheap vs. inexpensive. 

I think that when it comes to transactions we tend to behave irrationally and the field of neuroeconomics perhaps will eventually help make sense why we react that way.

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Antonio Ortiz

Antonio Ortiz has always been an autodidact with an eclectic array of interests. Fascinated with technology, advertising and culture he has forged a career that combines them all. In 1991 Antonio developed one of the very first websites to market the arts. It was text based, only available to computer scientists, and increased attendance to the Rutgers Arts Center where he had truly begun his professional career. Since then Antonio has been an early adopter and innovator merging technology and marketing with his passion for art, culture and entertainment. For a more in-depth look at those passions, visit SmarterCreativity.com.

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