Chapter

Neuroeconomics of risky decisions: from variables to strategies

Vinod Venkatraman, John W. Payne and Scott A. Huettel

in Decision Making, Affect, and Learning

Published in print March 2011 | ISBN: 9780199600434
Published online May 2011 | e-ISBN: 9780191725623 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199600434.003.0007

Series: Attention and Performance

Neuroeconomics of risky decisions: from variables to strategies

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We make a variety of decisions throughout our lives. Some decisions involve outcomes whose values can be readily compared, especially when those outcomes are simple, immediate, and familiar. Other decisions involve imperfect knowledge about their potential consequences. Understanding the choice process when consequences are uncertain — often called the study of decision making under risk — remains a key goal of behavioural economics, cognitive psychology, and now neuroscience. An ongoing challenge, however, lies in the substantial individual differences in how people approach risky decisions. Using a novel choice paradigm, this chapter demonstrates that people vary in whether they adopt compensatory rules (i.e., tradeoffs between decision variables) or non-compensatory rules (i.e., a simplification of the choice problem) in economic decision making. The chapter shows that distinct neural mechanisms support variability in choices and variability in strategic preferences. Specifically, compensatory choices are associated with activation in the anterior insula and the ventromedial prefrontal cortex, while non-compensatory choices are associated with increased activation in the dorsolateral prefrontal cortex and the posterior parietal cortex. The dorsomedial prefrontal cortex shaped decision making at a strategic level through its functional connectivity with these regions. Individual-difference analyses are a key direction through which neuroscience can influence models of choice behaviour.

Keywords: economic decision making; choice; risky decisions; compensatory rules; non-compensatory rules; individual difference

Chapter.  9352 words.  Illustrated.

Subjects: Cognitive Psychology

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