The Psychology of Everyday Life: Motivation and the Search For Happiness

The Psychology of Money

What about the social context?

Our evaluation of worth and value is also powerfully influenced by social factors. Consider the amount of money people are willing to spend for high-status belongings. Is a purse really worth $1,000? Is a watch? How many people would pay $80,000 for a BMW if the logo was removed and nobody could tell it was a BMW? People pay outrageous prices for luxury brands not because they believe the products themselves are worth the money, but because the product takes on social meaning. In effect, people are buying social status. This is why high-status people, such as movie stars or star athletes, are paid millions to endorse products such as athletic wear, cereal, or mattresses. Likewise, our sense of a fair salary, a reasonable price, and the worth of a purchase is often judged according to the social context. How much are our colleagues getting paid? How much did our neighbors pay for their car? Once again, advertisers are well aware of this tendency and have learned how to position their products to benefit from the social context.

Advertisers have long understood the importance of the emotional brain in making purchasing decisions, even before fMRI research. For example, a company selling lipstick associates the product with a life of beauty, youth, and glamour, even though it’s unrealistic to believe lipstick will provide all these things (iStock).

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