Not So Efficient Markets

Here’s an interesting setback for the Efficient Market Hypothesis. Researchers ran a wine tasting and found that people preferred wines they thought were more expensive. Not wines that are more expensive, just wines they think are pricier.

Researchers scanning the volunteers’ brains while they drank confirmed they enjoyed the pricier wines more. The experiment helps explain how marketing practices can influence both the preferences of consumers and the enjoyment registered by their brains, said Antonio Rengel, one of the study’s authors.
“The lesson is a very deep one, not only about marketing but about the human experience,” said Rangel, an associate professor of economics at the California Institute of Technology in Pasadena. “This study shows that the expectations that we bring to the experience affect the experience itself.”

On a related note, I’m raising the price of Crossing Wall Street to $1 million a year.

Posted by Eddy Elfenbein on January 15th, 2008 at 7:35 am

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