We test the effect of mood on behavior in a gift-exchange game. To induce a 'bad mood', second movers 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 behavior. We find that a bad mood implies more reciprocity while a good mood implies more generosity. Furthermore, first movers make more money when second movers are in a bad mood.
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