Neural Evidence for Reference-Dependence in Real-Market-Transactions

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Describe the main results and the methodology used in the paper.
Weber et al. (2007) hypothesized that people experience neural activities in their brains when selling a product, which is not there when purchasing commodities. The research method used involved sixteen participants without a history of psychiatric or neurological illness. Based on the Edinburgh Handedness Scale, all respondents were right-handed and had a mean age of 24.85 (Weber et al., 2007). The method involved two primary parts. In part one, the subjects purchased and sold sixty-four MP3 songs through auctions. The validity of this experiment was done by designing the exercise to reflect actual market behaviour. In addition, the participants were required to select a set of songs from an online music store to enhance emotional attachment. In part two, the respondents assessed their buying satisfaction. The first condition was comparing the realized prices to the original bidding. The prices were compared to those on the online music store. Results indicated that the respondents quoted higher prices when selling than in purchasing. Researchers identified a significant difference between buying and selling prices. The mean for purchasing was 0.51 and that for selling was 1.21 (Weber et al., 2007). A large gap was noted between the willingness to accept (WTA) and willingness to pay (WTP). The participants exhibited a significant brain activation of the amygdala during selling compared to when purchasing. In addition, the results indicated a brain activation of the caudate nucleus on the left side when respondents were selling songs. In contrast, the activation was not there when the respondents were purchasing the songs. Some subjects became so attached to the songs that they stated that it was difficult for them to lose their favorite songs. As such, human decision-making involves reference-dependence as depicted by the prospect theory.
What is the paper’s contribution in the field of Neuro Economics?
The paper has significant contributions to the field of neuro economics. In particular, neuro economics is a significant realm of study that portrays human decision-making and enables people to understand their brain functioning by studying economic behaviours. For instance, individuals might be willing to pay $2 when purchasing a specific product. Nevertheless, when it comes to selling it, they are likely to demand more money, such as $5. Weber et al. (2007) depict that researchers were more attached to the songs they had selected from an online music store when it came to selling them such that they demanded more money than they had bought them (Weber et al., 2007). That is why brain activation was high when selling products and it was not seen when buying the products. A significant gap was identified between WTA and WTP. In that light, the paper reveals that economic activities trigger various brain regions, such as the amygdala, left caudate nucleus, and right parahippocampal gyrus (Weber et al., 2007). The experiment gave relevant insights into reference-dependent and how it influences human decision-making. Since the research mimicked an actual market transaction, the results obtained are generalizable and contribute to the field of neuro economics. Besides, it can be used to guide various ...