Your Morals Are Your Moods¤

We test the e®ect of players ' moods on their behavior in a gift-exchange game. In the ¯rst stage of the game, player 1 chooses a transfer to player 2. In the second stage, player 2 chooses an e®ort level. Higher e®ort is more costly for player 2, but it increases player 1's payo®. We say that player 2 reciprocates if e®ort is increasing in the transfer received. Player 2 is generous if an e®ort is incurred even when no transfer is received. Subjects play this game in two di®erent 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 e®ective: subjects who saw the funny movie reported a signi¯cantly better mood than those who saw the sad movie. These two moods lead to signi¯cant di®erences in player 2's behavior. We ¯nd 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