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MIT Sloan Researchers Use Neuroscience to Understand Consumer Spending

What influences people’s decisions to spend money? Researchers at MIT Sloan’s Neuroeconomics Laboratory are taking a closer look at brain activity to help uncover the answers, the school reported this week.

Using an expensive technology called functional magnetic resonance imaging (fMRI), scientists at the Athinoula A. Martinos Imaging Center are scanning people’s brains as they make real decisions involving money, hoping to test traditional assumptions about consumer spending. Drazen Prelec, a professor of management at MIT Sloan and in the MIT Economics and Brain and Cognitive Sciences Departments, is leading the research.

“This could fulfill an ancient dream of revealing what is happening inside the head as we make decisions,” Prelec said as part of an article on the MIT Sloan website. Glimpsing actual brain activity – especially with regard to trust or brand loyalty – could provide valuable new insight into decisions people make that defy conscious explanations. “People may believe that they drink Coke for the taste, but in reality they may be responding mainly to the brand image,” Prelec said.

Recent research using brain scanning found that when making personal financial decisions online, subjects were more likely to trust bank representatives whose faces resembled their own. “We suspect this is unconscious,” Prelec said. “There may be deep evolutionary reasons for trusting someone who resembles you,” he continued, adding that brain scans suggested that the mistrust of a stranger’s face was mediated by a brain structure called the amygdala, responsible for rapid, unconscious judgments of fear and mistrust.

Prelec and colleagues also have used brain scanning to understand how people feel about payment and personal finances, revealing that brain structures associated with pain were activated when subjects saw a high price appear next to a product they were considering purchasing. This could help explain why consumers favor purchasing arrangements that disguise the payment transactions, such as subscriptions, or why people seem more willing to pay a higher price when paying with credit rather than with cash. It may literally feel less painful.

For more on brain-scanning research now being conducted at MIT Sloan, click here.

Posted in: MBA News

Schools: MIT Sloan

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