Live Biofeedback in Electronic Markets

Abstract

Decisions in electronic markets are frequently made under time pressure and in competition to others. Both factors can cause the decision maker to experience high levels of arousal. Without sound emotional processing, arousal can have detrimental effects on decision making. In this thesis the use of live biofeedback to support emotion perception and thus, to facilitate emotion regulation during emotionally charged decision making is evaluated. Based on a systematic literature review existing live biofeedback research is analyzed in Chapter 2. A transmission model for live biofeedback is developed that classifies the main components of live biofeedback applications and the flow of information in form of transmission signals. To address the identified research gaps, three experimental studies (study I-III) are designed that investigate the effects of arousal and the use of live biofeedback in electronic markets. Study I in Chapter 3 examines how arousal affects purchasing decisions with and without social interaction to analyze the context dependence of the effects of arousal on decision making. The results reveal that in auctions, where social interaction is a key characteristic, arousal increases final prices. Purchasing decisions without social interaction, however, are not affected by arousal. As social interaction has been identified as an essential factor for arousal to affect decision making, the subsequent studies II and III investigate the effects of live biofeedback in markets experiments that involve social interaction. Study II in Chapter 4 evaluates the effects of live biofeedback on emotional processing in the context of auction bidding. Without prior biofeedback training this novel user interface element alters decision making processes at a cognitive and affective level. Study participants, who suppress emotional expressions, experience higher levels of physiological arousal. When provided with live biofeedback, this effect is mitigated. Furthermore, participants who receive live biofeedback show increased coherence of physiological and perceived arousal. Study III in Chapter 5 examines the use of biofeedback in a game that has frequently been used to model financial markets, that is, the beauty contest game. In this study, participants complete a training in order to familiarize with the live biofeedback prior to the experiment. The analysis reveals that live biofeedback increases arousal perception and reduces suppression of emotional expressions. Importantly, participants who receive live biofeedback yield higher decision making quality. In summary, this thesis provides further insights into the effects of arousal on behavior and how live biofeedback affects emotional processing and decision making in electronic markets. The results of this thesis suggest that live biofeedback is a promising tool to support emotion perception, regulation, and decision making of market participants.