Description: Department Seminar

Location: 368A Heady Hall

Title: Breaking Bad News: Economic Rationality, Emotion Regulation and Cognitive Ability

Abstract: This study examines how the emotional load from exposure to negative news affects economic rationality. While economic theory assumes rational consumer behavior, the role of emotional load in decision-making remains under explored. To address this, I varied emotional load by exposing participants to negative news before a 25-period budget allocation task designed to test adherence to the Generalized Axiom of Revealed Preference (GARP). Ex-ante simulations optimized the experimental design to minimize random behavior passing the GARP test, and an innovative method for assessing cognitive abilities was integrated. Data collection occurred in two rounds: the first confirmed that exposure to negative news imposes a significant emotional burden, while the second tested economic rationality under this distress. Results indicate that emotional load reduces success rates in basic cognitive tasks by 2.9 percentage points but does not impair economic rationality on aggregate. However, the effects vary by political orientation, with very liberal participants exhibiting and 11.1 percentage point decrease in rationality, while conservatives demonstrate improved performance under emotional load.