Does Consumer’s Happiness and Other Emotions Signaling Affect Seller’s Prices? Theory and Evidence From Six Field Studies

Abstract

The factors that determine the prices of goods and services are within the core inquiry of economic science. Do consumer’s emotions affect seller’s selling prices? The current study explores this issue through six field studies. The first four studies focus on happiness, demonstrating for the first time that happiness signals affect the prices of products and services. Happy customers are offered to pay lower price for goods–cellphones and bicycles–and for related services. The results are relevant both in face-to-face and online interactions and in between—and within—subject designs, implying that extended real income is another objective benefit of individual happiness. Two additional experiments do not show the same effect when other emotions–anger and disgust–are signaled by the consumer. We present a formal model for the positive happiness premium and discuss the welfare implications of our findings. JEL classification: C93, D01, D21.