JavaScript disabled. Please enable JavaScript to use My News, My Clippings, My Comments and user settings.

If you have trouble accessing our login form below, you can go to our login page.

If you have trouble accessing our login form below, you can go to our login page.

Mood and weather are powerful buy words

<em>Illustration: Kerrie Leishman</em>

Illustration: Kerrie Leishman

So you're about to go shopping. I imagine you trust yourself. You shouldn't. New research shows you are far more vulnerable to whims than previously thought - even when buying really big things - and your decisions are affected by your mood, although not always how you would expect.

It's well-known that you should "never shop on an empty stomach". A few years back economists Daniel Read and Barbara van Leeuwen proved the point by asking British office workers to choose between receiving an apple or a Mars bar. But they weren't going to get the gift for a week, so they had to guess what they would want in the future, in the same way as we have to when shopping. Half were asked just after they had eaten, half towards the end of the day when they would be hungry. The hungry half were far more likely to say they would want a Mars bar in a week. The half that had eaten were more likely to want an apple.

Another researcher found that shoppers who'd been given a muffin before entering a supermarket were far more likely to stick to their lists.

But big decisions are different, right? Not about cars they are not. Americans buy convertibles. The US National Bureau of Economic Research finds they buy more of them on days that are exceptionally hot. Think about that: a car lasts for a decade, but a decision about the type of car we buy can depend on the weather on the day we go shopping.

The Bureau of Economic Research examined 40 million car sales records spanning eight years. It found people bought more convertibles in spring and summer than in winter and autumn. That's not surprising - buying in a season when you can use a convertible means it can give you an extra season's worth of use. But what was surprising was what happened on days when the weather was exceptionally hot. On days that were 9 degrees celsius hotter than normal for the month sales of convertibles jumped 9 per cent, even in winter. Adding weight to the finding, those convertibles were bought on a whim the Bureau found the convertibles bought on those days far more likely to be returned.

But that couldn't happen for homes, could it? Surely we make that purchasing decision - the most expensive of all - on the basis of a very strict shopping list. For instance, we would decide ahead of time whether or not we wanted a swimming pool - we certainly wouldn't decide on a whim based on the weather the day we went shopping.

The NBER same study published in July finds that homes with pools sell for $1400 more in summer than they do in winter. The finding makes little sense. By the time a contract for a house has been settled (typically two months) the season will most probably have changed. Yet it is the weather at the time of purchase - not at the time of moving in + that makes buyers more likely to want pools.

The researchers pose a disturbing question: if we are so casual and easily influenced when making our most important purchasing decisions, how casual are we when we make even more important decisions, such as where we will work, who we will marry, whether we will get divorced and whether we will have a children?

Economist George Loewenstein from Carnegie Mellon University coined the term "projection bias". We make our guesses about what we will want by projecting forward what we have wanted in the past. But he says we bias that projection by overweighting what we happen to want at that particular moment. (And we bias it in other ways. We typically overestimate how much income we will need in retirement because we base our guess on how much we've needed in the high expenditure years we have been working.)

And we are biased in other ways as well. We are extraordinarily susceptible to numbers and words written down on unrelated pieces of paper.

A few years back I took part in a mass experiment at the University of NSW ran by Daniel Kahneman, one of the few psychologists to have won the Nobel Prize in economics. He asked each of us to take out our driver's licence and write the last two digits of its number at the top of a page. Then we had to guess the value of a bottle of red wine and write down the dollar figure - anything from $0 to $99 - at the bottom of the page. The bottle might have been a collectors item. Its label said it was created for the 2000 Olympics.

Sure enough, those of us with licences whose last two digits spelt out a low number thought the wine was cheap. Those whose licences produced a high number thought the wine was expensive.

The phenomenon is called "anchoring". It is deployed against us the minute we set foot inside a store. Harvey Norman puts affordable television sets next to expensive sets whose high prices are prominently displayed. The high price acts as an "anchor" making us think the affordable ones are cheap. Studies show the mere presence of a credit card sign in a shop increases our willingness to spend there, whether or not we are planning to spend with a card.

Until now the effect of our moods has been a mystery. On one hand some of us splurge when we are feeling down - so-called "retail therapy". On the other hand many of us indulge in luxuries when we are feeling good. In October Francine Petersen of the European School of Management and Technology put forward a theory that bridges the gap. She says it depends on whether we think our mood is fixed. If we are depressed and we feel that won't change we won't bother to splurge. If we feel good and we feel that can't change we'll feel it's safe to splurge without worrying about the consequences. Which is probably why the music in shops is so relentlessly positive. It's important.

Peter Martin is economics correspondent. Ross Gittins is on leave.

12 comments

  • Umm on really hot days you leave the top up and the air con on! Also stops you getting sun burnt. What is it that they say about consumers? Predictably Irrational?

    Commenter
    SinoPeach
    Date and time
    January 02, 2013, 12:25PM
    • And we like to think we're a (largely) logical species. I wonder, if knowing about the power of suggestion and mood helps temper behaviour, or if we're led by these things regardless.

      Commenter
      Relle
      Date and time
      January 02, 2013, 12:54PM
    • "And we like to think we're a (largely) logical species."

      Human beings like to think a lot of things about themselves that are incorrect or just plain delusional.

      It's a double-edged sword. On one hand our credulity and self-deception makes us easy victims, but on the other hand there have been a number of studies that have demonstrated a strong correlation between being realistic and suffering from depression and anxiety. Ignorance is really bliss for most people.

      Commenter
      DM
      Date and time
      January 02, 2013, 1:54PM
    • Personally, I think reason and logic control my behavior. Surely this could not apply to me!

      Commenter
      Zuga
      Date and time
      January 02, 2013, 2:56PM
  • This is no good, its always bloody hot!

    Commenter
    evanism
    Date and time
    January 02, 2013, 12:58PM
    • This theory obviously doesn't work for me. I buy things only if I need it and within my reach. I don't even buy things because the item is on sale and I like it if I don't need it.

      Commenter
      max
      Location
      sydney
      Date and time
      January 02, 2013, 12:58PM
      • Nice article Peter. I would also recommend those negotiating large purchases do their very best to completely ignore the opening quote from the other party. It will likely influence your subsequent counter-offers..... although you won't know it.

        Commenter
        WM
        Date and time
        January 02, 2013, 1:27PM
        • Never heard of impulse buying a car before. Interesting...

          Commenter
          Daniel
          Location
          Sydney
          Date and time
          January 02, 2013, 1:43PM
          • nice article, enjoyed it

            Commenter
            kc
            Location
            sydney
            Date and time
            January 02, 2013, 2:08PM
            • I find this theory obviously true in Muslim countries / communities during fasting month of Ramadan Muslims who fast buy more food and drinks (non alcoholic ) before they break the fast. As they are not allowed to eat and drink any thing from dawn until sunset (empty stomach) usually they cook / buy prepared food and drinks more than needed even they love unwanted food items before break the fast, however after they break the fast they do not want even most favorite dish on the table, which left even untouched until their mood changes. In summer they consume more liquid and hardly anyone eat meal while in winter / cold season they consume more meal than drinks. I also have observed that their grocery bill for this month is almost double or more for this month.

              Commenter
              Ijaz Ahmad Rao
              Location
              Pakistan
              Date and time
              January 02, 2013, 2:16PM

              More comments

              Comments are now closed
              Featured advertisers

              Special offers

              Credit card, savings and loan rates by Mozo