Knowing and Making

Just a link for Thursday. From the Daily Telegraph, wine tastes better in blue- or red-lit rooms . At least in Germany. [ Original paper here  is quite well-written and reveals some interesting details] According to the newspaper reports, the psychologist who ran the study (Dr Daniel Oberfeld-Twistel) thinks the explanation is that the light puts people in a better mood. But the paper cites another study showing that in fMRI tests: Whenever colors and odors were presented together that subjectively constituted a good match in the eyes of the observer, activity in the orbitofrontal cortex and in the insular cortex was observed Now we all know to be cynical about fMRI tests, but it seems reasonable to draw the very broad conclusion that there is some cognitive basis for this effect. I am inclined to believe that - like most behavioural wine effects - it originates in a self-fulfilling calculation of the expected "value" of the wine and is a cognitive rather than a mood eff...

Experimentally, we know that the following phenomenon can be observed: Offer consumers two bottles of wine, priced at £5 and £9. A proportion will not buy at all; of those who do buy, a proportion (70% would be typical) will buy the £5 bottle and the rest (30%) will buy the £9. Repeat the experiment with three bottles on offer, priced at £5, £9 and £15. A similar proportion will still not buy; of those who do, the propensity to buy the £9 bottle is much higher than previously. It would not be surprising to see the proportions exactly reversed: 30% at £5 and 65% at £9. Barely anyone will buy the £15 bottle, but a majority of buyers are influenced by its presence. This experiment violates the assumptions that conventional consumer theory is based on. Rational agents "should" have an context-independent demand curve for each product: they are supposed to evaluate the utility of each option, apply a constant exchange rate between utility and cash, compare the result to the price ...