[show abstract][hide abstract] ABSTRACT: We study the behavior of subjects facing choices between certain, risky, partially ambiguous, and ambiguous lotteries in an experimentally controlled environment. Our observations are subjects' choice behavior, response times, and brain activations. The choices of subjects are consistent with economic theories designed to predict these choices, namely theories modeling ambiguity aversion. The additional evidence we present supports a specific interpretation of the decision process that is implementing these choices. In particular it supports the conjecture that subjects face the choice task as an estimation of the value of the two lotteries; and that a measure of the diﬃculty of the choice provides an important explanatory variable (in addition to risk and ambiguity aversion) of the observed behavior. Further support for the interpretation of choice as cognitive task in our experiment comes from the observation that emotional factors seem to play a minor role. SpeciÞcally, the medial orbito frontal region and amygdala are not activated. Compared with the set of results organized in the Somatic Marker Hypothesis (Damasio , Bechara, Damasio and Damasio ), these results suggest that a static choice without learning and feedback on outcome is a task of a diﬀerent nature than a choice with learning and feedback. The brain imaging data suggest that the estimation is of an approximate nature when the choices involve ambiguous and risky lotteries, and requires mental faculties that are shared by all mammals and in particular are independent of language. The regions in the brain that are activated are located typically in parietal lobes, which are known to be involved in approximate calculations. Choices involving partial ambiguous lotteries produce in addition an activation of the frontal region, which indicates a diﬀerent, more sophisticated cognitive process. The time to decide is shorter for arguably harder choices, a finding that suggests the need for new models of the allocation of eﬀort in the choice process.
Games and Economic Behavior 02/2005; 52(2):257-282. · 0.83 Impact Factor
[show abstract][hide abstract] ABSTRACT: In two different types of institutions, English and Dutch auctions, we collect heart rate data, a proxy for emotion, to test hypotheses based on findings in neural science about the effect of emotion on economic behavior. We first demonstrate that recording heart rates does not distort prices in these auctions. Next we ask if knowledge of the intensity of a participant's emotional state improves our ability to predict price setting behavior beyond predictions of price based on usual economic variables. Our answer is that “institutions matter.” In the Dutch (English) auctions we find (no) evidence that knowledge of emotional intensity affects our ability to predict price setting behavior. We then entertain the proposition that the cardiac system is an information system that processes economic events. We are able to show that this hypothesis is consistent with our observations and furthermore that the processes differ across institutions.
[show abstract][hide abstract] ABSTRACT: In this study we examine how the introduction of a reference lottery with nonrandom outcomes alters the way in which choices among pairs of lotteries are made, even if it does not alter the choices. We use different domains (some of the lotteries produce gains, other losses) and different contexts (one member of the pair, the reference lottery, may be either risky or certain). In our experiment, the change from gain to loss domain affects choices: subjects are risk averse in the gain domain, but not in the loss domain. On the contrary, the context effect of the certain lottery does not affect choices. However, the introduction of the certainty reference lottery affects two behavioral variables, response time and brain activation, in a dramatic way. This result suggests that the certainty lottery promotes a different process through which preferences are revealed, even if the differences among lotteries may not be large enough to induce different choices.
Proceedings of the National Academy of Sciences 04/2003; 100(6):3536-41. · 9.74 Impact Factor
[show abstract][hide abstract] ABSTRACT: Economic forces shape the behavior of individuals and institutions. Forces affecting individual behavior are attitudes about payoffs (gains and losses) and beliefs about outcomes (risk and ambiguity). Under risk, the likelihoods of alternative outcomes are fully known. Under ambiguity, these likelihoods are unknown. In our experiment, payoffs and outcomes were manipulated independently during a classical choice task as brain activity was measured with positron emission tomography (PET). Here, we show that attitudes about payoffs and beliefs about the likelihood of outcomes exhibit interaction effects both behaviorally and neurally. Participants are risk averse in gains and risk-seeking in losses; they are ambiguity-seeking in neither gains nor losses. Two neural substrates for choice surfaced in the interaction between attitudes and beliefs: a dorsomedial neocortical system and a ventromedial system. This finding reveals that the brain does not honor a prevalent assumption of economics---the independence of the evaluations of payoffs and outcomes. The demonstration of a relationship between brain activity and observed economic choice attests to the feasibility of a neuroeconomic decision science.
[show abstract][hide abstract] ABSTRACT: We study the behavior of subjects facing choices between certain, risky, partially ambiguous, and ambiguous lotteries in an experimentally controlled environment. Our observations are the choice behavior, the response time, and the brain activations of the subjects. Choices were simple enough to insure consistent behavior with small amount of noise. The behavioral evidence supports the idea that subjects face the choice task as an estimation of the value of the two lotteries and that some measure of the difficulty of the choice provides an important explanatory variable (together with risk and ambiguity aversion) of the observed behavior. The brain imaging data suggest that the estimation is of approximate nature, and involves mental faculties that are independent of language and shared by all mammals. The regions in the brain that are activated are not located in frontal structures, which are known to be involved in planning, but in parietal regions typically involved in approximate calculations. The time to decide is shorter for arguably harder choices, a finding that suggests the need for new models of the allocation of effort in the choice process. Emotional factors seem to play a minor role in the choice.