CHAPTER FIVE

 MOTIVATIONAL AND EMOTIONAL

INFLUENCES ON DECISION MAKING
 WHEN EMOTION AND COGNITION COLLIDE
 Eachone of us faces internal conflicts between what we
want to do and what we think we should do.
 Addicts
 Emotional intelligence
 Consumers must often decide whether to buy the product
they want or a product they think they should purchase for
health, environmental, or budgetary reasons.
 Decision makers have an automatic affective, or
emotional, reaction to most options.
 The emotional response is often in disagreement with the
decision that an individual would make after more
thoughtful reasoning.
 MULITPLE SELVES
 We frequently behave like two individuals
 One of our “selves” is in favor of a decision that
provides immediate gratification rather than an
alternative that would provide greater further rewards
 Cognitive neuroscience research suggests that we may
actually be able to identify our multiple selves in
different brain regions.
 People who have suffered injuries to emotional regions
of the brain sometimes become more rational decision
makers, in the sense that they are more likely to select
options with higher expected value.
 In sum, the neuroscience evidence
suggests that emotional brain areas impel
us to want some things that are not in our
long-term interests, and that more
sophisticated brain areas in the prefrontal
cortex can override these desires and
select options with higher expected utility.
 MULITPLE SELVES

 Whatever the source of our clashing internal

preferences, they have substantial economic
consequences. Indeed, the multiple-selves theory
helps to explain otherwise perplexing phenomena.
For example
 The prevalence of large industries supporting both
smoking products and treatments to help people quit
smoking.
 Interest based business and apparent religious
commitments.
 Preference Reversals
 Internal inconsistencies between transient concerns and
long-term self-interest reflect natural tensions between
what people want to do and what they think they should
do.
 Evidence suggests that emotional appeal (and the “want”
self) is stronger when we evaluate options one at a time,
and that the more reasoned, reflective “should” self will
be stronger when we confront multiple options at the
same time and can weigh them against each other.
 Discounting of future benefits and losses. A rational
decision maker would discount the future using
exponential discounting, which means discounting each
future time period by the same percentage.
 By contrast, self-control problems such as procrastination,
laziness, and addiction can produce choices that reflect
hyperbolic discounting.
 we are biased toward the present.

 Essentially, when customers are making decisions about the

future, they focus on what they should do. But when making
decisions in the present, they are more likely to do what they
want to do.
 People support for “should” policies goes up significantly if
the policy will be implemented in the future rather than
immediately.
 The contradictions between decisions made at
different time periods can be traced to the
vividness of present concerns.
 our differing temporal preferences are rooted in
our biology. When we consider an immediate
reward, the emotional centers in our brains are
activated. When we consider a delayed reward, it
is the more rational and reflective prefrontal
cortex that is most active
 Reconciling Internal Conflicts

 Theissue on internal inconsistency raises

important questions. For our own long-term
health and safety, should we try to allow the
“should” self to completely control our
decisions? Or does the “want” self has
something valuable to add to improve the
decisions of the “should “self?
 We offer advice on this issue from three areas:
economics, Raiffa’s decision-analysis
perspective , and a negotiation framework.
 Advice from Economists
 Economists argue that the key to resolving our internal
conflicts is to create a means of controlling the
destructive impulses of the short-term decision maker.
 The “should” self is the planner, it can develop advance
schemes to hold, co-opt, or control the “want” self.
 Multiple-selves and the agency problem.
 Owner being should-self and manager being want-self.
 The “should” self (the principal) could search for ways to
bring the interests of the two selves into alignment.
 Inflexible
pre-commitment can increase the
effectiveness of such rules. For example,
 alcoholics can take a drug called Antabuse, which produces
violent nausea if they subsequently consume alcohol.
 Similarly, paternalistic outside parties (such as parents, an
employer, or the government) sometimes try to help people
avoid succumbing to the “want” self.
 Many states try to protect consumers from short-term
impulses by legislating revocability periods for high-priced
items (e.g., condominium share purchases).
 Advice from Decision theorists

 We each “contain multitudes.”

 Decision analysts usually assume that decision makers
have coherent and internally consistent preferences.
 Howard Raiffa’s advocates acknowledging
 such internal inconsistencies,
 the fact that two competing preferences can not both be in an
individual’s interest.
 Raiffa recommends questioning each self to find out which
one is making the error.
 Raiffa suggests that the communication between two selfs
should take place until reconciliation occurs.
 Raiffa’s approach recognizes the importance of giving
voice, opportunity, and input to the emotional and
visceral (instinctive) needs of the “want” self.
 As Loewenstein (1996) notes, the “want” self can
provide valuable input: “Hunger signals the need for
nutritional input, pain indicates the impingement of some
type of potentially harmful environmental factors, and
emotions serve a range of interrupting, prioritizing,
and energizing functions.”
 Advice from Negotiation
Researchers

 Raiffa’s approach assumes that the two parts of the self

can negotiate a settlement to their differences, given their
mutual dependence on each other.
 Yet we can all think of instances in which the “should”
self made a decision with the logic of self-interest, only
to be later over ruled by the impulsive behavior of the
“want” self.
 For example, a diet or exercise regime could be sabotaged by
an individual’s failure to reconcile the “want” self to the
“should” self’s new agenda.
ADVICE
 Impose several criteria on your negotiation between the “want” and
“should” selves.
 First, require the two sides to reach an agreement, as ongoing
conflict would lead the “should” self to continue to make a variety of
decisions that the “want” self sabotages.
 Second, the agreement should be pareto efficient; that is , there
should be no other agreement that the “want” self and the “should”
self both prefer over the created agreement.
 This agreement might be reached through “discussions” and
compromises between the two selves about key issues—for
example,
 how often the “want” self will get to eat ice cream, how many days a week
the “should” self will exercise, and so on. By both selves agreeing to
reasonable times and limits, the “want” self is likely to be more willing to
follow the agreement.
 Third, the “should” self must not push for an
agreement that is outside the bargaining zone; that
is, the terms must not be unacceptable to the “want”
self, either currently or in the future. The “should”
self must remember that there is no court of law for
suing yourself for a contract violation—the “want”
self can void the contract at any time.
 POSITIVE ILLUSIONS
 Most people view themselves, the world, and the future in a
considerably more positive light than is objectively
accurate.
 Positive illusions enhance and protect self-esteem, increase
personal contentment, help individuals to persist at difficult
tasks, and facilitate coping with aversive and uncontrollable
events.
 Positive illusion are beneficial to physical and mental
health.
 Unflattering or undesirable facts are suppressed in the
interest of self-enhancement, and that we write our own
history by altering our memories to make them consistent
with these self-flattering beliefs
 Evidence suggests, however, that these effects operate
at an unconscious level and are strongest when people
are responding quickly and automatically . System 1
thinking.
 When they think about the question more
systematically (i.e., engaging system 2 thinking), for
instance, people no longer prefer the letters in their
names over other letters.
 
THE LIMITS OF POSITIVE
ILLUSIONS
 More recent reseach has questioned the strength of the
totalitarian ego’s relentless pursuit of self-enhancement.
Some of this work shows the limits of self-
enhancement.
 Other research documents self-diminution, in which
people report that they are worse than they actually are
or claim that they are worse than others, when in fact
they are not.
 Other research questions whether positive illusions are
really good for us after all.
 The extent to which people can maintain unrealistically positive
beliefs about themselves may be constrained to some degree by
the objectivity of these beliefs, their credibility, and the
potential to disconfirm them.
 For example, it is easier for individuals to maintain the view
that they are more honest than others than to maintain the belief
that they are better tennis players or excellent
conversationalists.
 It is harder to have optimistic illusions when they are
inconsistent with easily available, objective data
OVERESTIMATION AND
OVERPLACEMENT

 Overestimation occurs when people

overestimate their performance, chances of
success, or control of a situation.
 Overplacement occurs when people incorrectly
rank themselves as better than others at
particular tasks.
 Research has documented some intriguing inconsistencies
between these different types of positive illusions
 Perhaps the most notable of these inconsistencies is the fact that
overestimation and overplacement are negatively correlated with
each other across tasks.
 In other words, people most often tend to overestimate their own
performance concerning difficult tasks, while actually tending to
underestimate their performance on easy tasks. But people also
are most likely to report believing that they are better than other
on easy tasks and worse than others on difficult tasks.
 Comparative optimism is the belief people have that they are
more likely than others to experience positive events, but less
likely than others to experience negative events.
 Even if people are not systematically biased (just
imperfect) in their performance estimates, we should still
expect most people to believe that they perform better
than others in most contexts. Why ? Because we select
career paths, job assignments, and hobbies based in part
on our beliefs in our own “unique” talents (Moore and
Cain, 2007; Tesser, 1988).
ARE POSITIVE ILLUSIONS GOOD FOR YOU?
 These illusions are said to contribute to Psychological well-
being by protecting an individual’s positive sense of self.
 Positive illusions increase personal commitment, help
individuals persist at difficult tasks, and facilitate coping with
aversive and uncontrollable events.
 Positive illusions help to create entrepreneurs who are willing to
discount risks.
 Positive illusions allow us to maintain cognitive consistency,
belief in a just world, and perceived control
 Seligman advocates the selection of salespeople based on the
magnitude of their positive illusion—what he calls “learned
optimism. “ He argues that unrealistically high levels of
optimism bolster sales-force persistence.
 However, this adaptive story is
incomplete and indeed dangerous in most
decision-making environments. Every day,
people invest their life savings in new
businesses that have little chance of
success. Similarly, falsely assuming that
hey are irreplaceable, people make
ultimatums to their employers and end up
losing their jobs.
SELF-SERVING REASONING

 The west blames the Third World for burning the rain
forests and for overpopulation. At the same time, The
Third World blames the West for pollution caused by
industrialization and excessive consumption.
 A U.S News and World Report survey asked, “If
someone sues you and you win the case, should he pay
your legal cost?” Eighty-five percent of respondents
answered “yes”. However, only 44 percent answered
“yes” to this question: “If you sue someone and lose the
case, should you pay his costs “” (Budiansky, Gest, and
Fisher, 1995, p.52).
 Perceptions and expectations are often biased in a self-
serving manner.
 When presented with identical information, individuals
perceive a situation in dramatically different ways,
depending on their role in the situation.
 Specifically, individuals first determine their preference
for a certain outcome on the basis of self-interest and
then justify this preference on the basis of fairness by
changing the importance of attributes affecting what is
fair.
 While people frequently have the goal of reaching a fair
solution, their assessments of what is fair are often biased
by self-interest,. For example, it is common for all parties
in a conflict to suggest differing viable but self-serving
solutions, which each party justifies, based on abstract
fairness criteria.
 Self-serving reasoning allows people to believe that it is
honestly fair for them to have more of a given resource
than an independent advisor would judge. The problem lies
not in a desire to be unfair but in our failure to interpret
information in an unbiased manner.
 A good research topic to see the cultural or religious
impact.
 Hastorf and Cantril (1954) asked student football fans
from Princeton and Dartmouth to view a short film of a
football game between the two schools. Although both
sides watched the same film, each side thought the
opposing team played less fairly and engaged in more
aggressive and unsportsmanlike conduct. The
researchers observed that the two groups of students
“saw a different game.”
 As we discussed in our review of the confirmation heuristic
in Chapter 2, when people encounter favorable information,
they are likely to accept it uncritically. Negative information,
however, produces more critical and suspicious evaluation.
Dawson, Gilovich, and Regan (202) nicely document our
tendency to select standards of evidence in self-serving ways.
They note that it sounds completely reasonable to accept an
argument when the available data are consistent with the
argument. On the other hand, it also seems reasonable to
require the data to be overwhelmingly supportive.
 EMOTIONAL INFLUENCES ON
DECISION MAKING
 Evidence suggests that a good mood increases reliance on heuristics
and results in more biased judgments.
 Good mood increases reliance on stereotypes, while a bad mood
decreases reliance on stereotypes.
 Unhappy people might be less likely to exhibit positive illusions than
happier people.
 A number of scholars have suggested that bad moods may trigger
more deliberative (system 2) thought processes that could reduce
biases in judgment.
 Others have shown that sad people are more affected by anchors
than are people in a more neutral state, and as a result, make worse
decisions.
 Clearly, the early, broad conclusion linking negative moods to
greater decision-making accuracy was incorrect.
 Specific Emotions
 Researchers have identified a small set of basic emotions,
including happiness, sadness, fear, disgust, and anger, whose
expressions are the same across cultures. Each of these emotions
activates a set of feelings and appraisal tendencies that prepares us
to respond to the world in a certain way.
 Fear makes our minds sensitive to risks and prepares our bodies to run
off.
 Disgust focuses out attention on physical contamination (unwanted act)
and motivates us to purge ourselves of contaminating agents.
 Sadness douses attention on the self, leading people to ponder more,
and motivates them to seek change.
 Anger is a particularly interesting emotion, because although it is
negative, it shares many features with happiness, including increased
confidence, increased feelings of power, and decreased sensitivity to
risk.
 Each of these emotions can influence judgments.
 Emotional state can have a significant effect on the nature of the
endowment effect. The endowment effect describes the fact that
the value people place on a commodity is greater if they own the
commodity than if they do not.
 Disgust triggers the desire to expel, making people more eager to
get rid of things they own and avoid acquiring new things.
Consequently, disgust led sellers to be willing to sell at lower
prices, and led potential buyers to lower how much they would
be willing to pay.
 In contrast, sadness triggered the desire to change one’s
circumstance, thereby increasing people’s willingness to pay to
buy and decreasing the price they demanded to sell.

 Lerner and her colleagues (2004) show how emotions can
affect financial decisions. More interestingly, by
manipulating emotion in a separate task that occurs prior to
the buying and selling decisions, they show how emotional
influences bleed over from one context to another unrelated
context.
 Many scholars have assumed that emotions could be
categorized simply into positive and negative emotions. But
Lerner, small, and Loewenstein (2004) show that two
different negative emotions can create two very different
patterns of effects.
 Emotions are tightly bound up with our perception of
risk Happy people are more optimistic, while sad people
are more pessimistic.
 Fear and anxiety create risk-averse behavior. But angry
people are especially willing to endure risk, and even
appear quite optimistic with respect to risk. Angry
people think that their risk is lower for a wide variety of
career and health risks. Ironically, angry people even
believe their risk of heart disease is lower than do others.
Although, those who experience more anger are actually
at heightened risk of heart disease.
 • Mood-Congruent Recall

 Depressed people often report that the bleakest aspect of

their depression is that they cannot remember what it felt
like being not depressed.
 Similarly, when people are happy, they might have
trouble recalling how they felt during more difficult
times.
 Human resource consultants advise that it is best to ask
the boss for a raise when he or she is in a good mood.
The happy boss will find it easier to recall times when
you performed well and is also more likely to feel
optimistic about the company’s ability to afford a raise
for you.
 The weather can also influence people’s moods in ways
that influence their perceptions.
 We are simply better at remembering information
consistent with our state of mind than information
inconsistent with it.
 Regret Avoidance
 Another area in which emotions drive behavior is the
anticipation of regret. Consider the following story:
 Imagine that you are at an out of town business meeting that
runs late. As soon as you can break away, you head to the
airport to catch the last flight home. If you miss the flight,
which is scheduled to leave at 08:30 p.m. , you will have to
stay overnight and miss an important meeting the next day. You
run into traffic and do not get to the airport until 08:52 pm. You
run to the gate, arriving there at 08:57 p.m. when you arrive,
either:
 You find out that the plane left on schedule at 08:30 p.m. or
 You see the plane depart, having left the gate at 08:55 p.m.

 
 Which is more upsetting, (a) or (b)? Most People quickly
agree that (b) is more upsetting. Yet, both possibilities
create the same net outcome for you-You have missed
your flight, and will have to spend the night.
 Choice (b) simply highlights the counterfactual thought
that with any minor change in schedule, you could have
made the flight.
 Silver medal winners at the Olympics are less happy
with their achievement than bronze medal winners.
Obviously, any athlete would choose to win silver over
bronze. However, when researchers coded the initial
reactions and the facial expressions of athletes as they
received their medals, they found that the bronze medal
winners appeared to be happier, while the bronze medal
winners were thrilled simply to be medalists, the silver
medal winners could not help imagining that they almost
won the gold.
 The motivation to minimize the opportunity for regret can lead
people to make decisions that are suboptimal with respect to actual
outcomes.
 Decision makers distort their decisions to avoid such negative
feedback in two ways.
 First, they can choose options that shield them from feedback on foregone
alternatives.
 Second, when feedback on the decision not chosen is inevitable, they can
make choices that are likely to compare favorably to foregone options.
 In this context, it may be useful to have your “should” self compare
the various outcomes. The two selves will also need to negotiate
with each other over the relative value of better outcomes (such as
winning a silver rather than a bronze medal) compared with the pain
of regret.
  
 SUMMARY
 Too often, people view their emotions as uncontrollable. The
fact is, even if we can not stop ourselves from feeling, we
may be able to limit the negative effects of our emotions on
the quality of our decisions. People are typically unaware of
the influence of their emotions on their decisions. Thus,
though we may feel that we are angry, we may falsely believe
that anger will not influence our judgment.
 Perhaps a better appreciation of the literature can help create
the knowledge that “Just like everyone else, I am affected by
my emotional state.” It may simply help to be more aware of
the ways in which emotion can bias our judgments.
 To neutralize the negative impact of our emotions on our
decisions, we must begin by identifying our emotions
and their sources.
 Labeling our emotions in itself can be an effective
means of reducing their strength.
 It is well known among emotion researchers, for
instance, that asking research participants to explicitly
identify their emotional state can often eliminate the
effect of an emotional manipulation.
 Unpleasant emotions are sometimes even more
effectively neutralized by identifying the source of the
emotion because doing so allows people to react to the
causal stimulus with system 2’s more cognitive
assessments, rather than with system1’s impulsive and
emotional reactions.
 Earlier we noted that the weather influences people’s
reports of life satisfaction. But consider what happens
when, just before asking about a question about life
satisfaction, a pollster asks a respondent, “So how’s the
weather where you are ? This question eliminates the
effect of weather on responses to the life-satisfaction
question.
 Another strategy for managing the negative impact of
emotions is to make decision makers accountable for
their choices. Those who must in some way justify their
decisions learn to hold their emotions in check and move
toward more systematic, system 2 thinking. This may be
because such articulation is itself a system 2 processor
because verbalization can neutralize an emotion.
 To create such accountability for yourself, you might
report your rationale for a decision to your boss or simply
write down for yourself an explanation for your decision.
Logically and empirically, the simple cognition of
accountability has the ability to reduce the likelihood of
acting on emotions in ways that you will later regret.
 It may be possible to institutionalize controls on emotion. It is
widely known that government policies can be overly influenced
by the vividness of various issues.. As a result, we as a society
tend to allocate scarce resources to vivid concerns rather than to
the issues for which scarce resources would do the most good.
Why ?
 Vivid stories create emotional reactions; these emotions, in turn,
lead us to misallocate scarce resources.
 Sunstein (2002) argues, “just as the senate was designed to have
a cooling effect on the passion of the House of Representatives,
so cost-benefit analysis might ensure that policy is driven not by
hysteria or alarm, but by a full appreciation of the effects of
relevant risks and their control.