I’ve written about our wine biases before, but now we have anatomical evidence of why, exactly, expensive wine seems to taste better.

The experiment, led by researchers at Cal-Tech and Stanford, was simple. [A free version of the study is here.] Twenty subjects tasted five wine samples which were distinguished solely by their retail price, with bottles ranging from $5 to $90. Although the subjects were told that all five wines were different, the scientists had actually only given them three different wines. This meant that the first two wines were used twice, but given two different price labels. For example, Wine 1 was labeled as a $35 dollar wine and a $5 wine. The subjects sipped the wines inside an fMRI machine.

Not surprisingly, the subjects consistently reported that the expensive wine tasted better. They preferred the taste of the $90 bottle to the $10 bottle, and thought the $45 bottle was more delicious than than the $5 wine.

What’s interesting is that the brain scans reflected these subjective reports. In fact, when people drank more expensive wines a part of the prefrontal cortex called the medial orbitofrontal cortex (mOFC) got significantly more excited. The scientists argue that the activity of mOFC can be used as a neural correlate for pleasure, so that more expensive wines not only tasted better but actually provided us with more “subjective utility,” as an economist might say. Of course, these wine preferences aren’t really valid. In a follow-up experiment, the subjects again tasted all five wine samples, but without any price information. This time, they thought the $5 dollar wine tasted the best.

The best way to think of this experiment is as the economic equivalent of the placebo effect. Consider a 2005 experiment by Tor Wager of Columbia. His experiment was brutally straightforward: he gave college students electrical shocks while they were stuck in an fMRI machine. Half of the people were then supplied with a fake pain-relieving cream. As expected, people given the pretend cream said the shocks were significantly less painful. The placebo effect eased their suffering. Wager then imaged the specific parts of the brain that controlled this psychological process. He discovered that the placebo effect depended entirely on the prefrontal cortex. When people were told that they’d just received a pain-relieving cream, their frontal lobes responded by inhibiting the activity of the emotional brain areas (like the insula) that normally respond to pain. However, when the same people were informed that the same cream was “ineffective” at blocking pain, their prefrontal cortex went silent. Because people expected to experience less pain, they ended up experiencing less pain. Just as our expectations about expensive wine influenced the taste of the wine itself – expensive wine is supposed to taste better – so do our expectations about pain affect our experience of pain.

Baba Shiv, a co-author on the recent wine study, has previously shown how price can warp our consumer decisions. He supplied people with an “energy” drink that was supposed to make them feel more alert and energetic. Some participants paid full price for the drinks, while others were offered a discount. The participants were then asked to solve a series of word puzzles. To Shiv’s surprise, the people who paid discounted prices consistently solved fewer puzzles than the people who paid full price for the drinks. The subjects were convinced that the stuff on sale was much less potent, even though all the drinks were identical. “We ran the study again and again, not sure if what we got had happened by chance or fluke,” Shiv says. “But every time we ran it we got the same results.”

Why did the cheaper energy drink prove less effective? According to Shiv, consumers typically suffer from a version of the placebo effect. Since we expect cheaper goods to be less effective, they generally are less effective, even if they are identical to more expensive products. This is why brand-name aspirin works better than generic aspirin, or why Coke tastes better than cheaper colas, even if most consumers can’t tell the difference in blind taste tests. “We have these general beliefs about the world -for example, that cheaper products are of lower quality – and they translate into specific expectations about specific products,” said Shiv. “Then, once these expectations are activated, they start to really impact our behavior.”