Forecast of your purchases: Cloudy perception with a chance of spending your money wrong

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Deciding what to buy? Go with what will make you happy. A new study finds that when we base our purchases off of economic value, we often get it wrong.

Imagine that you are deciding whether to purchase a concert ticket or a new pair of shoes. You weigh the pros and cons of each. Going to the concert with your friends might be a fun experience, but it will only last a night. The shoes on the other hand, can be worn again and again. Despite knowing that the concert will lead to greater happiness, you decide to skip it and go with the shoes.

A range of well-founded research suggests that experiential purchases lead to more happiness than material ones. Yet, when actually making purchases, people tend to ignore this evidence. Why is this the case? Researchers Pualina Pchelin and Ryan Howell from San Francisco University hypothesized that people do not accurately forecast the economic value of experiential purchases.

The study, published on March 31st in the Journal of Positive Psychology, found that people believe material purchases will lead to greater economic value than experiential ones. When deciding what to buy, we usually prioritize economic value over well-being. A key finding of the study however, was that people’s assumptions about economic value are often wrong.  That is, we actually tend to report higher economic value for the experiential purchases they have made than for material ones.

When reading about these results,  I wondered if the finding could be a product of cognitive biases that allow us to alter our beliefs about an experience so that we do not feel like a fool for wasting our money. My second thought however was, does it matter? In a TED Talk entitled “The Surprising Science of Happiness,” psychologist Dan Gilbert discusses the concept of “synthesized” happiness, explaining that our beliefs about what will make us happy are often wrong.

When we do not get what we want, we alter our beliefs in order to make ourselves happy. This type of happiness is no less real–and often even greater–then the happiness we would have experienced if things had gone as planned. It is possible that the same could be true for economic value.  In the end, people reported that experiential purchases not only lead to greater well-being and happiness than material ones, but also to greater economic value. So next time, ditch the shopping and treat yourself to a nice day of good-hearted fun.

Source:

Journal of Positive Psychology

Pchelin, P. & Howell, R.T. (2014): The hidden cost of value seeking: People do not accurately forecast the economic benefits of experiential purchases. Journal of Positive Psychology. 1-13.

DOI:10.1080/17439760.2014.898316

About Daisy Bodman