Incidental Emotions and Cooperation in a Public Goods Game.

The study reported here considers the relationship between emotional state and cooperation. An experiment is conducted in which the emotions of fear, happiness, and disgust are induced using 360-degree videos, shown in virtual reality. There is also a control condition in which a neutral state is induced. Under the Fear, Happiness, and Disgust conditions, the cooperation level is lower than under the Neutral condition. Furthermore, cooperation declines over time in the three emotion conditions, while it does not under Neutral. The findings suggest that emotions are associated with the dynamic pattern of declining cooperation over time.

Positive Emotion and Honesty.

We report an experiment that considers the impact of emotional state on honesty. Using the die-rolling task created by Fischbacher and Föllmi-Heusi to detect the level of dishonesty in a sample of individuals, we study the effects of induced happiness on the incidence of self-interested lying. The experiment uses 360-degree videos to induce emotional state. We find that people behave more honestly in a state of happiness than they do in a neutral state.

The Effect of Wealth Shocks on Loss Aversion: Behavior and Neural Correlates.

Kahneman and Tversky (1979) first demonstrated that when individuals decide whether or not to accept a gamble, potential losses receive more weight than possible gains in the decision. This phenomenon is referred to as loss aversion. We investigated how loss aversion in risky financial decisions is influenced by sudden changes to wealth, employing both behavioral and neurobiological measures. We implemented an fMRI experimental paradigm, based on that employed by Tom et al. (2007). There are two treatments, called RANDOM and CONTINGENT. In RANDOM, the baseline setting, the changes to wealth, referred to as wealth shocks in economics, are independent of the actual choices participants make. Under CONTINGENT, we induce the belief that the changes in income are a consequence of subjects' own decisions. The magnitudes and sequence of the shocks to wealth are identical between the CONTINGENT and RANDOM treatments. We investigated whether more loss aversion existed in one treatment than another. The behavioral results showed significantly greater loss aversion in CONTINGENT compared to RANDOM after a negative wealth shock. No differences were observed in the response to positive shocks. The fMRI results revealed a neural loss aversion network, comprising the bilateral striatum, amygdala and dorsal anterior cingulate cortex that was common to the CONTINGENT and RANDOM tasks. However, the ventral prefrontal cortex, primary somatosensory cortex and superior occipital cortex, showed greater activation in response to a negative change in wealth due to individual's own decisions than when the change was exogenous. These results indicate that striatum activation correlates with loss aversion independently of the source of the shock, and that the ventral prefrontal cortex (vPFC) codes the experimental manipulation of agency in one's actions influencing loss aversion.

Exposure to Poverty and Productivity.

We study whether exposure to poverty can induce affective states that decrease productivity. In a controlled laboratory setting, we find that subjects randomly assigned to a treatment, in which they view a video featuring individuals that live in extreme poverty, exhibit lower subsequent productivity compared to subjects assigned to a control treatment. Questionnaire responses, as well as facial recognition software, provide quantitative measures of the affective state evoked by the two treatments. Subjects exposed to images of poverty experience a more negative affective state than those in the control treatment. Further analysis shows that individuals in a more positive emotional state exhibit less of a treatment effect. Also, those who exhibit greater attentiveness upon viewing the poverty video are less productive. The results are consistent with the notion that exposure to poverty can induce a psychological state in individuals that adversely affects productivity.

Prudence, Emotional State, Personality, and Cognitive Ability.

We report an experiment to consider the emotional correlates of prudent decision making. In the experiment, we present subjects with lotteries and measure their emotional response with facial recognition software. They then make binary choices between risky lotteries that distinguish prudent from imprudent individuals. They also perform tasks to measure their cognitive ability and a number of personality characteristics. We find that a more negative emotional state correlates with greater prudence. Higher cognitive ability and less conscientiousness is also associated with greater prudence.

Reference Point Heterogeneity.

It is well-established that, when confronted with a decision to be taken under risk, individuals use reference payoff levels as important inputs. The purpose of this paper is to study which reference points characterize decisions in a setting in which there are several plausible reference levels of payoff. We report an experiment, in which we investigate which of four potential reference points: (1) a population average payoff level, (2) the announced expected payoff of peers in a similar decision situation, (3) a historical average level of earnings that others have received in the same task, and (4) an announced anticipated individual payoff level, best describes decisions in a decontextualized risky decision making task. We find heterogeneity among individuals in the reference points they employ. The population average payoff level is the modal reference point, followed by experimenter's stated expectation of a participant's individual earnings, followed in turn by the average earnings of other participants in previous sessions of the same experiment. A sizeable share of individuals show multiple reference points simultaneously. The reference point that best fits the choices of the individual is not affected by a shock to her income.

The influence of probability format on elicited certainty equivalents.

We compare six different formats for the presentation of probabilities, in terms of the certainty equivalents that they elicit from human participants, and the probability-weighting parameters that participants' decisions imply. We find substantial differences among formats, including a visual analogue of the ratio bias. The results indicate that experimental results concerning decision making under risk can be greatly affected by the presentation format employed.

From bad to worse: striatal coding of the relative value of painful decisions.

The majority of decision-related research has focused on how the brain computes decisions over outcomes that are positive in expectation. However, much less is known about how the brain integrates information when all possible outcomes in a decision are negative. To study decision-making over negative outcomes, we used fMRI along with a task in which participants had to accept or reject 50/50 lotteries that could result in more or fewer electric shocks compared to a reference amount. We hypothesized that behaviorally, participants would treat fewer shocks from the reference amount as a gain, and more shocks from the reference amount as a loss. Furthermore, we hypothesized that this would be reflected by a greater BOLD response to the prospect of fewer shocks in regions typically associated with gain, including the ventral striatum and orbitofrontal cortex. The behavioral data suggest that participants in our study viewed all outcomes as losses, despite our attempt to induce a status quo. We find that the ventral striatum showed an increase in BOLD response to better potential gambles (i.e., fewer expected shocks). This lends evidence to the idea that the ventral striatum is not solely responsible for reward processing but that it might also signal the relative value of an expected outcome or action, regardless of whether the outcome is entirely appetitive or aversive. We also find a greater response to worse gambles in regions previously associated with aversive valuation, suggesting an opposing but simultaneous valuation signal to that conveyed by the striatum.

Neural mechanisms of the influence of popularity on adolescent ratings of music.

It is well-known that social influences affect consumption decisions. We used functional magnetic resonance imaging (fMRI) to elucidate the neural mechanisms associated with social influence with regard to a common consumer good: music. Our study population was adolescents, age 12-17. Music is a common purchase in this age group, and it is widely believed that adolescent behavior is influenced by perceptions of popularity in their reference group. Using 15-s clips of songs from MySpace.com, we obtained behavioral measures of preferences and neurobiological responses to the songs. The data were gathered with, and without, the overall popularity of the song revealed. Song popularity had a significant effect on the participants' likability ratings of the songs. fMRI results showed a strong correlation between the participants' rating and activity in the caudate nucleus, a region previously implicated in reward-driven actions. The tendency to change one's evaluation of a song was positively correlated with activation in the anterior insula and anterior cingulate, two regions that are associated with physiological arousal and negative affective states. Sensitivity to popularity was linked to lower activation levels in the middle temporal gyrus, suggesting a lower depth of musical semantic processing. Our results suggest that a principal mechanism whereby popularity ratings affect consumer choice is through the anxiety generated by the mismatch between one's own preferences and others'. This mismatch anxiety motivates people to switch their choices in the direction of the consensus. Our data suggest that this is a major force behind the conformity observed in music tastes in some teenagers.

Expert financial advice neurobiologically "Offloads" financial decision-making under risk.

BACKGROUND: Financial advice from experts is commonly sought during times of uncertainty. While the field of neuroeconomics has made considerable progress in understanding the neurobiological basis of risky decision-making, the neural mechanisms through which external information, such as advice, is integrated during decision-making are poorly understood. In the current experiment, we investigated the neurobiological basis of the influence of expert advice on financial decisions under risk. METHODOLOGY/PRINCIPAL FINDINGS: While undergoing fMRI scanning, participants made a series of financial choices between a certain payment and a lottery. Choices were made in two conditions: 1) advice from a financial expert about which choice to make was displayed (MES condition); and 2) no advice was displayed (NOM condition). Behavioral results showed a significant effect of expert advice. Specifically, probability weighting functions changed in the direction of the expert's advice. This was paralleled by neural activation patterns. Brain activations showing significant correlations with valuation (parametric modulation by value of lottery/sure win) were obtained in the absence of the expert's advice (NOM) in intraparietal sulcus, posterior cingulate cortex, cuneus, precuneus, inferior frontal gyrus and middle temporal gyrus. Notably, no significant correlations with value were obtained in the presence of advice (MES). These findings were corroborated by region of interest analyses. Neural equivalents of probability weighting functions showed significant flattening in the MES compared to the NOM condition in regions associated with probability weighting, including anterior cingulate cortex, dorsolateral PFC, thalamus, medial occipital gyrus and anterior insula. Finally, during the MES condition, significant activations in temporoparietal junction and medial PFC were obtained. CONCLUSIONS/SIGNIFICANCE: These results support the hypothesis that one effect of expert advice is to "offload" the calculation of value of decision options from the individual's brain.

Three studies on the neuroeconomics of decision-making when payoffs are real and negative.

PURPOSE: We summarize three previous neuroeconomic studies with two features that distinguish them from most others in experimental economics: (1) the use of physical pain to induce incentives and (2) acquisition of data on brain activation levels. By correlating behavior when payoffs are painful with brain activation, we are able to test for the neurobiological relevance of important phenomena previously observed in experimental studies that are at odds with classical economic theories of decision-making. These specific phenomena are (a) negative discounting of future payoffs; (b) nonlinear probability weighting; (c) the experience of regret and rejoice when making a decision under risk. METHODOLOGY/APPROACH: The expectation of pain is created through the use of mild electric shocks to the top of the foot. Pain confers disutility, so decisions are made in the domain of losses relative to the status quo. Simultaneous with these decisions, brain activation data is acquired through functional magnetic resonance imaging (fMRI). FINDINGS: We find evidence for negative time discounting of electric shocks. Participants who exhibited the most extreme forms of this discounting were distinguished by early and robust activation of a subset of the cortical pain matrix. We also find evidence for probability weighting in the domain of electric shocks, which is manifest at the neural level. We find evidence both behaviorally and neurally for regret and rejoice functions for painful outcomes. ORIGINALITY/VALUE OF CHAPTER: Previous experimental economic studies in the domain of losses have typically used monetary rewards. Here, we report behavioral effects and neural correlates using pain.

Nonlinear neurobiological probability weighting functions for aversive outcomes.

While mainstream economic models assume that individuals treat probabilities objectively, many people tend to overestimate the likelihood of improbable events and underestimate the likelihood of probable events. However, a biological account for why probabilities would be treated this way does not yet exist. While undergoing fMRI, we presented individuals with a series of lotteries, defined by the voltage of an impending cutaneous electric shock and the probability with which the shock would be received. During the prospect phase, neural activity that tracked the probability of the expected outcome was observed in a circumscribed network of brain regions that included the anterior cingulate, visual, parietal, and temporal cortices. Most of these regions displayed responses to probabilities consistent with nonlinear probability weighting. The neural responses to passive lotteries predicted 79% of subsequent decisions when individuals were offered choices between different lotteries, and exceeded that predicted by behavior alone near the indifference point.

Neurobiological regret and rejoice functions for aversive outcomes.

A decision maker may experience regret when a choice he makes results in a more adverse outcome than a different choice would have yielded. Analogously, he may experience rejoice when his choice resulted in better outcomes. We used fMRI to investigate the neural correlates of regret and rejoice where payoffs are in terms of a non-monetary medium. Incentives were created using painful outcomes in the form of mild electrical shocks to the foot and the possibility of avoiding them. We hypothesized that the neural response to a painful outcome resulting from an individual's choice would also reflect the degree of regret as measured by the likelihood that alternative choices would have yielded the same adverse outcome. Similarly, when an individual avoids a potential shock, he would experience a degree of rejoice that correlates with the probability he had of receiving the shock. For example, winning a bet when winning was unlikely, even if the outcome is the same, evokes more rejoice than winning when it was highly probable. Our results suggest that activation of a cortical network, consisting of the medial orbitofrontal cortex, left superior frontal cortex, right angular gyrus, and left thalamus, correlates with the degree of regret. A different network, including the rostral anterior cingulate, left hippocampus, left ventral striatum, and brain stem/midbrain correlated with rejoice. The right inferior orbitofrontal cortex, pre-supplementary motor area, anterior cingulate, and posterior cingulate showed similar patterns of activation with both regret and rejoice, suggesting that these regions may be associated with surprise from the realization of relatively unlikely events. Our results suggest that distinct, but overlapping networks are involved in the experiences of regret and rejoice.

Receptor theory and biological constraints on value.

Modern economic theories of value derive from expected utility theory. Behavioral evidence points strongly toward departures from linear value weighting, which has given rise to alternative formulations that include prospect theory and rank-dependent utility theory. Many of the nonlinear forms for value assumed by these theories can be derived from the assumption that value is signaled by neurotransmitters in the brain, which obey simple laws of molecular movement. From the laws of mass action and receptor occupancy, we show how behaviorally observed forms of nonlinear value functions can arise.