Was I the only one who wondered what Eliot Spitzer, New York’s former Governor, got from a prostitute for a $1,000/hour that he couldn’t have gotten for $100? The answer came in a recent study published in the Proceedings of the National Academy of Sciences. It turns out it’s not what “Kristen” did to “client # 9” that made her worth the money, but rather it was what Spitzer anticipated.
Doctors Baba Shiv, a Stanford University behavioral economist, and Antonio Rangel, a Cal Tech neuroeconomist, published a study in which they demonstrated how the brain changes when you anticipate that something great is going to happen. Lots of studies have shown that people’s judgments about quality are powerfully influenced by price; the general assumption is that expensive things have higher quality. It turns out that it’s not just a placebo effect: using neuro-imaging studies, the researchers discovered that the brain actually experienced pleasure more intensely. The medial orbitofrontal cortex, which makes judgments about pleasure, lights up more if you pay a premium for something.
The researchers didn’t use hookers (but the principle is the same); they used two bottles of wine, one priced at ten dollars, the other at ninety dollars. The experimental subjects didn’t know that the wine in the bottles was exactly the same, and the people who thought they were drinking the more expensive wine had a significantly greater activation in their medial orbitofrontal cortex.
When you’re paying a premium price for something, your investment actually increases the motivation to be satisfied. Did Spitzer get ripped-off? No, he actually got a better deal because buying at bargain prices sets you up to derive less satisfaction. No more discounted fees for me.