Final answer:
The study by Lerner, Small, and Loewenstein (2004) showed that emotional states affect economic decisions, contributing to behavioral economics' understanding of psychological factors in decision-making. The correct answer is A) Emotional States.
Step-by-step explanation:
The study conducted by Lerner, Small, and Loewenstein (2004) found that emotional states impacted decisions about buying and selling. This research is part of behavioral economics, a field that acknowledges traditional economic theory often overlooks the psychological factors influencing decision-making.
Behavioral economists recognize how one's mood—be it revenge, optimism, or feeling a sense of loss—can alter the perceived value of money and influence choices in ways that may seem irrational to an observer.
Behavioral economists argue that people's state of mind can affect their decisions about buying and selling. Lerner, Small, and Loewenstein (2004) conducted a study that showed how emotional states can influence economic decisions.
For example, someone feeling revenge, optimism, or loss may think differently about money and make different choices. This highlights the importance of understanding the psychological factors that influence decision-making.