Do our emotions guide our decision-making? Economic theorists have debated this question. Classical economic theories suggest that emotions are irrelevant to rational decision-making. However, modern research shows that emotions both help and hinder decisions. 

Studies on individuals with damage to brain regions that process emotions, called VMF patients, show their inability to make even simple decisions. For example, these patients can struggle to choose between a pencil or mug. This shows that emotions are vital to decision-making. 

Emotions Steer Us Clear of Risky Decisions

Bechara and Damasio’s (2005) study (Iowa Gambling Task) showed how emotions guide our decision-making. In the study, researchers compared how VMF patients compared on a gambling task against people without brain damage. In the card game study, players chose cards from four decks (A, B, C, D) to maximize their profits. Decks C and D offered small wins and losses but had a positive long-term outcome (good decks), while decks A and B had large wins but larger losses, leading to a negative overall outcome (bad decks). Players weren't told the deck logic upfront. 

As the game progressed, players without brain damage learned to avoid the bad decks and chose more cards from the good ones, ending the game with profits. In contrast, VMF patients (who have damage to brain regions handling emotions) failed to learn this pattern and kept picking from bad decks, resulting in losses. This inability to avoid bad choices reflects VMF patients' emotional deficits, which hinder decision-making. 

Players were later asked if they understood the deck logic, and the game was split into four stages of understanding: no idea, some idea, more understanding, and full comprehension. Around 70% of non-damaged players grasped the logic, while only 50% of VMF patients did. However, even without fully grasping the logic, non-damaged players avoided bad decks due to emotional cues. In contrast, even when VMF patients understood the logic, they still chose bad decks because they lacked the emotional response to avoid losses. 

Seller: Be Aware of How Emotions Guide Your Customers' Decisions

Bechara and Damasio’s research highlights the crucial role of emotions, particularly anticipatory signals, in decision-making. These somatic signals often guide people by providing a "gut feeling" about whether a decision is right or wrong. Emotions can help individuals recognize when a decision feels off, and in such cases, it’s wise to step back and objectively weigh all factors. Daniel Kahneman emphasizes that people are often unaware of how biases and preconceptions affect their decisions, even experts like himself. 

In purchasing decisions, emotions also play a vital role, especially in quick, intuitive (System 1) choices. For example, a yellow sale sign can trigger positive emotions from past experiences, prompting closer examination of a deal, while negative emotions may deter the purchase if past experiences were unfavorable. Emotions continue to influence more deliberate (System 2) decisions as well, where consumers gather information and think through their choices. Positive emotions also foster confidence in decisions, and a confident buyer is more likely to be satisfied, becoming a loyal customer and advocate for the business. Therefore, sellers should identify and evaluate how to increase the amount of positive emotion related to their purchasing process.