Mood-Driven Behavior in Strategic Interactions

NICA CAPRA* By C. MO
This paper presents results of laboratory experiments that test the effect of induced mood on behavior in one-shot dictator, ultimatum, and trust games. Psychologists characterize moods as low-intensity, diffuse, and relatively enduring affective states without a salient antecedent cause (e.g., feeling good or bad). In contrast, emotions are more intense and short lived, and they usually have a denite cause. Unlike emotions, moods may have more lasting effects on choices. Moods are thought to affect behavior by inuencing both the content of cognition (what we think of and remember) and the process of cognition (how we reason). I hypothesize that decisions in games are also affected by mood, since decisions require introspection, perception, anticipation, and choice of cognitive strategy, all of which psychologists have found to be inuenced by mood. In addition, recent functional magnetic resonance imaging (fMRI) studies reveal that both mood and emotions are closely intertwined with cognition. Exactly how moods affect behavior is not clear. The results from this experiment provide some evidence on this question. Indeed, mood seems to work as context in the sense that people perceive two identical logical structures differently depending on their mood. Consistent with the psychology literature, the data show that good-mood subjects are more altruistic or helpful, as revealed by their choices in the dictator game.
I. Emotions in Games

Games are rule-governed social interactions characterized by strategic interdependency. The rule-based nature of games allows observers to calculate a well-dened rational outcome and
* Department of Economics, Emory University, Atlanta, GA 30322 (e-mail: mcapra@emory.edu). I thank Rachel Croson, Paul Zak, Garry Charness, Luca Rigotti, and participants in the 2004 CSWEP-AEA session on Psychological Inuences on Economic Decisions for valuable comments. 367

test predictions against choices. In sufciently simple games, where cognitive limitations may not be of concern, departures from predicted outcomes could be attributed to emotional responses. Thus, partly because of their rulebased nature, neuroscientists are interested in using games to isolate and identify social emotions in the brain. Alan Sanfey et al. (2003) observed activation in brain regions responsible for processing anger and disgust (anterior insula) and conict (anterior cingulate cortex) when players get unfair offers in a simple ultimatum bargaining game. In an ultimatum game, a player (the proposer) is asked to decide how to split $10 by making an offer to another player (the responder). If the offer is rejected, both get zero. Self-interested rationality predicts that the responder should accept any offer greater than 0. The proposer, anticipating acceptance, should offer the minimum amount. Interestingly, deviations from game-theoretic predictions are correlated with the degree of insula activation, suggesting that emotions indeed play an important role in determining choice. Similarly, Paul Zak et al. (2003) show that in a trust game the levels of oxytocin, which is a neurotransmitter linked to mammalian prosocial behavior, are correlated with trust and trustworthiness. In a trust game, a player is given $10. He can transfer any amount between $0 and $10 to an anonymous player 2. The amount player 2 receives is then tripled, and she can return to player 1 any amount between $30 and $0. The amount transferred to player 2 is a measure of trust, whereas the amount returned indicates trustworthiness. Finally, in a series of binary choice games, Gary Charness and Brit Grosskopf (2000) observe that selfreported unhappiness is correlated with competitive preferences. These studies provide evidence of the involvement of affect in games. However, they lack direct control of the emotions that presumably determine choice. If it is the affective state that is causing people to be competitive, helpful,

368

AEA PAPERS AND PROCEEDINGS

MAY 2004

altruistic, or reciprocal, successfully inducing positive or negative affect may also inuence their choices. There is only one study on the effect of induced affect on behavior in the economics literature. Georg Kirchsteiger et al. (2002) use an investment game to study the inuence of mood. In an investment game, a player transfers money to a second player, who then decides how much effort to exert. Effort is costly but increases the rst players payoffs.
II. Mood and Behavior

Pathological mood disorders such as bipolar disorder are correlated with behavioral changes. A manic episode is characterized by inated self-esteem and hyperactivity. In contrast, a depressive episode is characterized by hopelessness and feelings of guilt and worthlessness. Psychologists have documented that these mood changes inuence performance at work, attitude toward risk (foolish business investments and reckless driving), use of drugs or alcohol, and eating disorders. However, even if one ignores these extreme cases, it is not difcult to notice the effect of mood in everyday choices. Charities, for example, show pictures of human deprivation to appeal to our sense of guilt to reach our pockets. Merchants play music to put us in a mood that would help their sales. In a recent eld experiment, Adrian North at the University of Leicester tested how moodinducing music affected wine sales in a British supermarket. When French music was played, customers bought more French wines, whereas German music increases sales of Gewurztraminer (Associated Press, 9 October 2003). Similarly, marketing research shows that creating mood by means of an unexpected occurrence (e.g., receiving a bag of candy) increases distortions in consumer choice experiments (Margaret Meloy, 2000). There is a large experimental literature in psychology that has documented the effects of mood on memory, judgments of self and others, risk perception, and choice of cognitive strategy. Gordon Bower (1981), for instance, showed that a person selectively attends to and processes information that is congruent with her current mood. Eric Johnson and Amos Tversky (1983) showed that good mood creates overoptimism, as revealed by a tendency to attach high

probabilities to desirable events and low probabilities to undesirable ones. Alice Isen (2000) demonstrated that positive affect enhances efcient reasoning and creativity, whereas negative affect enhances self-focus. Thus, despite some disagreements on the exact way mood affects behavior, it is clear from the psychology literature that mood affects both the content of thought and the process of thought. The neuroscience of affective states is still in its infancy, but some researchers have made progress in identifying brain functions linked to mood. For instance, Richard Davidson (2002) demonstrated that negative mood induced by showing violent pictures to normal subjects is linked to higher activity in the amygdala and to lower left-to-right frontal activity ratio. The left frontal region is a component of the executive part of the brain and seems to be responsible for the inhibition or regulation of the amygdala, which is responsible for processing fear, anger, and related emotions. Similarly, high activity in the left frontal region is linked to positive mood. This study and others (see Stacey Schaefer et al., 2002), show that induced moods affect neural circuitry in both the amygdala (emotional processes) and the pre-frontal cortex (executive processes) and consequently may affect behavior.1
III. Experimental Procedures

A. Mood Induction and Validation In developing mood-inducing techniques in the laboratory, psychologists are careful about choosing methods that are hedonically relevant, but productive of a low-intensity affect. An effective mood-inducer should cause a person to access thoughts that are of similar hedonic tone as the mood. Thus, most procedures use recollection or imaging of emotional events. These include: (i) the Velten procedure (subjects read suggestive neutral, positive, or negative statements and are asked to imagine themselves in a certain mood); (ii) hypnosis (subjects are hypnotized and asked to assume a particular mood);

1 Good mood also releases dopamine, which may activate dopamine receptors in the frontal cortex and enhance alertness and reasoning.

VOL. 94 NO. 2

REALISM IN EXPERIMENTAL ECONOMICS TABLE 1DICTATOR GAME Choice W X Y Description Player A: $6 Player B: $2 Player A: $5 Player B: $5 Player A: $6 Player B: $1

369

(iii) memory elicitation (subjects are asked to recall and write about a sad or happy event from their lives); (iv) employment of mood-inducing audiotape or videotape; and (v) experience of success/failure during experimental paradigms. I used memory elicitation and experience of success/failure in my experiments. These methods are favored, among others, by William Morris (1989) in part because they evoke a direct individual experience of the emotion. The experience of success or failure was implemented by giving subjects a hard (bad mood) or easy (good mood) set of MENSA questions. Upon completion of all questions, participants were given the answers for self-evaluation with no other feedback from the experimenter. The recall procedure consisted of asking subjects to write about a sad (bad mood) or happy (good mood) recent event that affected their lives. After each mood-induction section, a self-report mood valuation survey was provided so that subjects could rank how they felt. A value of 1 represented very bad, and a value of 8 represented excellent. Overall the techniques seem to be effective, assuming that subjects reported their mood honestly. The mean, mode, and median mood ranks for the bad (good) mood treatment were 4.47 (6.13), 5 (7), and 5 (6), respectively.2 B. Overview and Subjects Participants were recruited from various economic courses. A total of 72 subjects participated in six sessions, each with 8 14 people. Upon arrival, participants were paid $5 for showing up, and earnings during the experiment averaged $20. In three sessions negative mood was induced, and in three sessions positive mood was induced. The instructions consisted of several sections and were read aloud. In section 1, participants were given 10 minutes to respond to a series of MENSA questions. An-

swers to these questions were then distributed, and a mood self-evaluation survey was handed out. In section 2, half of the participants were A and half B, each A subject was randomly matched with a B subject to play a dictator game similar to that of Jason Dana et al. (2003), depicted in Table 1. A choice of W can be described as individualistic, X as helpful, and Y as spiteful. Responses of A were immediately collected, but shown to B at the end of the experiment. In section 3, participants received new identication letters, half were A and half were B. The A players were given the role of proposers in a $10 ultimatum bargaining game. Decisions were collected and shown to B subjects during the same section. In section 4, subjects were given 10 minutes to write about a positive or negative recent experience that affected their lives. They were asked not to write their ID number on their monologue. This section was followed by a binary trust game similar to that of Kevin McCabe et al. (2003), depicted in Figure 1. Players A were asked to choose between L and R. A choice of L allocated $5 to each player. However, if R was chosen, B had a choice to keep $15 and return nothing (choose L), or keep $10 and return $10 (choose R). Finally a second self-report mood validation survey was distributed.3
IV. Experimental Results

A. Dictator
Experience of success/failure was implemented in the rst section, whereas memory recall was implemented in the forth section. In the good-mood treatment, there was an average gain in mood of 0.29 points; in the bad-mood treatment there was an average loss in mood of 0.12 points. The distribution of mood ranks revealed at the end of the experiment was: (0, 1, 0, 7, 8, 8, 7, 1, 2) for bad mood and (0, 0, 0, 2, 11, 9, 12, 4) for good mood.
2

None of the 26 A subjects in this game chose Y (spiteful), but there was a difference between the total number of W (individualistic) and X

3 Instructions and data are available from the author upon request.

370

AEA PAPERS AND PROCEEDINGS

MAY 2004

C. Trust Trusting and trustworthy behavior are measured by the number of R choices made by players A and B, respectively. In the goodmood treatment, 42 percent (8/19) were trusting choices and ve out of eight people showed trustworthy behavior. In the bad-mood treatment, 59 percent (10/17) were trusting, and seven out of 10 were trustworthy. The differences across mood treatments, although interesting, are not statistically signicant at 0.10. The results of McCabe et al. (2003) are taken as a benchmark for comparison. In their game, all payoffs were as in Figure 1, but $15. They found that 63 percent (17/27) are trusting and 65 percent (11/17) are trustworthy. The results of their experiment are closer to the bad-mood treatment results. The null hypothesis of no difference between the benchmark and bad mood cannot be rejected at 0.10 (chisquare 1.96, df 1). With respect to trusting behavior, the aggregate data show no difference between treatments (ranks 6 8 had same number of R choices as ranks 15; in both cases 50 percent trusted). Trustworthy behavior, on the other hand, is affected by mood rank. Trustworthy subjects accounted for 83 percent (5/6) of the subjects in mood ranks 1 4 (bad mood); 57 percent (4/7) in rank 5 (neutral mood); and 50 percent (3/6) of the subjects in ranks 6 8 (good mood). The observation that bad-mood people are more trustworthy or reciprocal than goodmood people is consistent with Kirchsteiger et al.s (2002) results.
V. Explaining the Data

FIGURE 1. THE BINARY TRUST GAME

(helpful) choices. In the bad-mood treatment 8/13 were helpful, as compared to 12/13 in the good-mood treatment. In addition, all subjects who chose W reported a low mood rank (4). The chi-square test reveals that the null hypothesis of no difference between good- and badmood choices can be rejected at 0.10 (chi-square 3.467, df 1, p 0.08). The results from Dana et al. (2003) are used as a benchmark of comparison. In their binary dictator game (no Y option), they observe 14 out of 19 X choices. Using their data, I cannot reject the null hypothesis of no difference between the chosen benchmark and the bad-mood choices (chi-square 0.52, df 1). B. Ultimatum Mood had only a small effect on choices in the ultimatum bargaining game. Mean, median, and modal offers in the bad (good) mood treatments were 3.94 (3.86), 4 (4), and 4 (3), respectively. The lowest offer was $1, and the highest was $5; all offers were accepted. Interestingly, a closer look at the aggregated data suggests that there is a negative correlation between selfreported mood and offers. On average, the happier subjects are also the more strategic. Dividing mood ranks into two groups (5 and 5), the mean, median, and modal offers are 4.06, 4, and 4 for moods 5, and 3.76, 4, and 3 for moods 5, respectively. These results are within the range of observed offers in other studies (see Colin Camerer, 2003 p. 50).

The results from the dictator, ultimatum, and trust game experiments indicate that choices under induced bad mood are closer to the benchmark levels than choices under good mood. The strongest effect of induced mood was evidenced in the dictator game, where good-mood subjects were more helpful or altruistic. The data suggest that positive affect makes people more positively aware of the other players payoffs. Indeed, psychologists argue that good mood unambiguously induces helping behavior independent of subject pool, context, and mood-induction technique (see John Dovidio, 1984). The causes of such enhanced pro-social

VOL. 94 NO. 2

REALISM IN EXPERIMENTAL ECONOMICS

371

behavior are not clear, but it is possible that they have something to do with homeostasis or the tendency of a system to maintain internal stability. Antonio Damasio (1994 p. 179) notes that [t]he internal preference system is inherently biased to avoid pain, seek potential pleasure, and it is probably pretuned for achieving these goals in social situations. Thus, a happy mood would motivate a person to engage in actions that make her feel good to maintain the warm glow. Consistent with the idea that people seek potential pleasure and avoid pain, negative mood should motivate a kind of affective selfregulation. As mentioned before, there is neurological evidence that regulation takes place (Davidson, 2002). The question is: what type of self-regulation? Helping others in a bad mood could be a way to self-regulate through selfgratication. However, the evidence in the psychological literature is weak; bad mood usually makes people more self-focused, less aware of others, and less energetic (Isen, 2000).4 Indeed, bad and good moods do not necessarily result in symmetrical self-regulating behavior. The results from the ultimatum and trust games, however, show subtle differences caused by different affective states. The subtlety of the results may be due to the order of treatments, since both the ultimatum and the trust games were played after the dictator game. Despite this, it is clear from the data that good-mood choices in the ultimatum and trust games are closer to rational choices and farther from the benchmark than bad-mood choices. One could interpret this result as suggesting that positive affect enhances reasoning. Indeed, arousal level of people in good moods is usually higher, which may make people feel more condent and alert. The reason why I did not observe more selsh or rational choices in the dictator experiments among good-mood subjects may be that the dictator is not really a game, since there is no strategy involved. Mood is an almost entirely unexplored topic in economics. The results from this
Another self-regulatory strategy is attributional bias, which makes people take personal credit for success and blame others for failure. Some psychologists believe that at least some types of depression may be due to the inability to use this bias.
4

study provide some evidence of the effect of mood on behavior. In terms of experimental methodology, this research indicates that researchers need to be concerned not only about context created by language, but also about mood. Context affects behavior because it provides unconscious cues to past experience that embody a process of how one perceives a current task. A similar effect seems to be produced by mood. REFERENCES
Bower, Gordon. Mood and Memory. Ameri-

can Psychologist, February 1981, 36(2), pp. 129 48. Camerer, Colin. Behavioral game theory. Princeton, NJ: Princeton University Press, 2003. Charness, Gary and Grosskopf, Brit. Relative Payoffs and Happiness: An Experimental Study. Working paper, Universitat Pompeu Fabra, Barcelona, Spain, January 2000. Damasio, Antonio R. Descartes error. New York: Putnam, 1994.
Dana, Jason; Weber, Roberto and Xi-Kuang, Jason. Exploiting Moral Wriggle Room: Be-

havior Inconsistent with a Preference for Fair Outcomes. Working paper, Carnegie Mellon University, 2003. Davidson, Richard. Anxiety and Affective Style: Role of Prefrontal Cortex and Amygdala. Biological Psychiatry, January 2002, 51(1), pp. 68 80. Dovidio, John F. Helping Behavior and Altruism: An Empirical and Conceptual Overview, in L. Berkowits, ed., Advances in experimental social psychology. New York: Academic Press, 1984, pp. 362 427. Isen, Alice. Positive Affect and Decision Making, in M. Lewis and J. Haviland, eds., Handbook of emotions. New York: Guilford Press, 2000, pp. 41735. Johnson, Eric and Tversky, Amos. Affect, Generalization, and the Perception of Risk. Journal of Personality and Social Psychology, July 1983, 45(1), pp. 20 31.
Kirchsteiger, Georg; Rigotti, Luca and Rustichini, Aldo. Your Morals Are Your Moods.

Working paper, University of California Berkeley, July 2002.

McCabe, Kevin; Rigdon, Mary L. and Smith,

372

AEA PAPERS AND PROCEEDINGS

MAY 2004

Vernon L. Positive Reciprocity and Inten-

tions in Trust Games. Journal of Economic Behavior and Organization, October 2003, 52(2), pp. 26775. Meloy, Margaret. Mood-Driven Distortion of Product Information. Journal of Consumer Research, December 2000, 27(3), pp. 345 59. Morris, William. Mood: The frame of mind. New York: Springer-Verlag, 1989.
Sanfey, Alan; Rilling, James; Aronson, Jessica; Nystrom, Leigh and Cohen, Jonathan. The

in the Ultimatum Game. Science, June 2003, 300(5626), pp. 175558.

Schaefer, Stacey; Jackson, Daren; Davidson, Richard; Aguirre, Geoffrey; Kimberg, Daniel and Thompson-Schill, Sharon. Modulation of

Amygdalar Activity by the Conscious Regulation of Negative Emotion. Journal of Cognitive Neuroscience, August 2002, 14(6), pp. 91321.
Zak, Paul; Kurzban, Robert and Matzner, William. The Neurobiology of Trust. Work-

Neural Basis of Economic Decision-making

ing paper, Claremont Graduate University, 2003.