Buzzword: Neuroeconomics

What does it mean? Neuroeconomics is “the study of how the brain makes decisions, specifically decisions related to resource allocation,” explains Brian Knutson, assistant professor of psychology and neuroscience at Stanford University. Knutson and his peers rely on brain-imaging technology to measure people’s thoughts and emotions during the economic decision-making process. (Read more about their work in “Neural Predictors of Purchases,” published in the journal Neuron.)

While the science neuroeconomics is relatively new, researchers have already come up with some intriguing insights into why we buy the things we buy. A study by researchers from the California Institute of Technology and Stanford University, for example, used wine to demonstrate how marketing and pricing can influence product perceptions. The study concluded that volunteers not only liked the taste of what they believed to be the more-expensive wines but some of them also reported that those pricier bottles made them happier. (The study paper, "Marketing Actions Can Modulate Neural Representations of Experienced Pleasantness," appeared in the Proceedings of the National Academy of Sciences.)

Why the buzz? The Consumer Reports laboratories aren’t equipped with brain scanners. Still, by extension, neuroeconomics does factor into our work. Consider kitchen ranges. In recent years, pro-style ranges have turned into status symbols for the home, veritable must-haves in luxury kitchens. Yet as our tests indicate, these expensive appliances, like the one shown, don’t necessarily outperform mainstream ranges even though they cost at least twice as much.

Why then would someone buy a pro-style range? If neuroeconomists are right, it could be that range owners don’t notice the deficiencies of their appliance. Having paid top dollar, they believe their range is broiling steaks and simmering sauces to perfection. (A second—dare I say more cynical—explanation is that the range is there only to add value to the house or to impress the neighbors, so consumers accept any shortcomings.)

As compelling a field as neuroeconomics is, we’ll keep preaching the value of research-based buying decisions, especially when it comes to major appliances. You won’t need a brain scan to measure your frustration when your range goes on the fritz a week before the start of the holidays.—Daniel DiClerico

Essential information: Read more about neuroeconomics in “Mind Games,” by John Cassidy, in The New Yorker.