Your Morals Might Be Your Moods∗

We test the effect of players’ moods on their behavior in a gift-exchange game. In the first stage of the game, player 1 chooses a transfer to player 2. In the second stage, player 2 chooses an effort level. Higher effort is more costly for player 2, but it increases player 1’s payoff. We say that player 2 reciprocates if effort is increasing in the transfer received. Player 2 is generous if effort is incurred regardless of the transfer received. Subjects play this game in two different moods. To induce a ‘bad mood’, subjects in the role of player 2 watched a sad movie before playing the game; to induce a ‘good mood’, they watched a funny movie. Mood induction was effective: subjects who saw the funny movie reported a significantly better mood than those who saw the sad movie. These two moods lead to significant differences in player 2’s behavior. We find that a bad mood implies more reciprocity while a good mood implies more generosity. Since high transfers are relatively more common, player 1 make more money when second movers are in a bad mood.