Neural Systems Responding
to Degrees of Uncertainty in
Human Decision-Making
Ming Hsu
Meghana Bhatt
Ralph Adolphs
Daniel Tranel
Colin Camerer
What is Neuroeconomics
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Neuroeconomics seeks to ground economic theory
in details about how the brain works.
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Adjudicate competing models
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Debates between rational-choice and behavioral models
usually revolve around psychological constructs
E.g. loss-aversion and a preference for immediate rewards.
Before, these constructs have typically been unobservable.
Provide new data and stylized facts to inspire and
constrain models.
Example: Dual-self models
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A number of them in recent years
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Bernheim & Rangel 2004
Benahib and Bisin 2004
Benabou and Pycia 2002
Brocas and Carrillo 2005
Fudenberg & Levine 2005
Miao 2005
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“This is consistent with recent evidence from MRI studies, such as
McClure et al. [2004], that suggests that short-term impulsive
behavior is associated with different areas of the brain than longterm planned behavior.” (Fudenberg & Levine)
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The notion of a dual-self has been around since Plato.
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Neuroscientific data new.
Tools of Neuroeconomics
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These (and other) tools enable us to study
economic behavior at the neural level
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Functional magnetic resonance imaging (fMRI)
 Indirect observation of neuronal activity
 Temporal resolution: 2-3 secs
 Spatial resolution: 2-3 mm3
Lesion patients
 Assess the necessity of brain region for certain behavior.
 Spatial resolution: varies with size of lesion.
Modularity: this organizing principle of the brain is what
allows us to use these tools.
Decision Making Under Risk
and Ambiguity
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Ambiguity and ambiguity aversion is a long-standing topic in
decision theory.
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There is a large theoretical and empirical literature to draw upon.
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Schmeidler 1989
Gilboa & Schmeidler 1988
Camerer & Weber 1992
Invoked to explain a number of economic phenomena
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Knight, Keynes, Ellsberg, and co.
Home bias
Equity premium
Entrepeneurship
The behavioral phenomenon is robust
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Camerer & Weber reviews experimental evidence.
Decision Making Under Risk
and Ambiguity
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Ambiguity is uncertainty about probability, created by missing
information that is relevant and could be known.
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Risk: Probability of head on a fair coin toss (known p, p = 0.5)
Ambiguity: Probability of head on a biased coin of unknown bias
(unknown p, p = ?)
Ellsberg Paradox
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Urn A with n balls: n/2 red, n/2 green.
Urn B with n balls: k red, n-k green (k unknown).
Lottery: choose color, then ball from urn. If match, win $x. If mismatch,
$0.
Most people indifferent between choosing red or green in either urn A or
urn B.
Non-trivial proportion prefer urn A.
Approaches to Decision-Making Under
Ambiguity
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Deny existence of ambiguity/risk distinction
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Models of ambiguity aversion
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Non-additive probabilities (capacities and Choquet
integrals)
set-valued probabilities (min-max)
2nd order prior and nonlinear weighting
State dependent utility models
Overgeneralization of a rational aversion to asymmetric
information
What Neuroeconomics Can
Say?
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Are risk and ambiguity distinguished at a neural
level.
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If so, are the underlying neural circuitry
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Two systems
 Competing
 Independent
One system
Can this data be used to constrain the existing
models.
fMRI Experiment Design
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Ellsberg type gambles
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World knowledge questions
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Canonical example of decision-making under ambiguity
Control for possible framing effects of numerical
Closer analog of “real-world” decisions
Adverse selection
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“Unnatural habitat” hypothesis.
Betting against agent who has better information.
information
Ellsberg Type Questions
Real World Questions
Yes
No
Yes
No
Betting Against Informed Opponent
0
Experimental Sequence
Ambiguous condition
Self paced trials
48 trials total
Stimuli present for 2 sec after choice
Blank screen 4-10 sec
Each session about 10-15 min
Risk condition
Statistical Analysis of fMRI Data
Image time-series
Realignment
Kernel
Design matrix
Smoothing
General linear model
Statistical parametric map (SPM)
Statistical
inference
Normalisation
Gaussian
field theory
p <0.05
Template
Parameter estimates
Courtesy of http//:www.fil.ion.ucl.ac.uk/spm
Data Analysis
Linear model
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Individual Analysis
1.
64x64x32 time series
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Dummies
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damb: ambiguity trial
drisk: risk trial
dpost: post-decision interval
: Hemodynamic response
convolution operator
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yt   i   i amb  d i amb ,t
i
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  i risk  d i risk ,t   i post  d i post ,t
 y i t 1   i t .
Group Analysis: Random
Effects
2.
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
Ambiguity > Risk: iamb >
irisk
Risk > Ambiguity: irisk >
iamb
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amb > risk
risk > amb
Results
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We find three main clusters of activation
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They appear to separate into two processes
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Amygdala: Fear of the unknown
Lateral orbitofrontal (OFC): integration of
Dorsal striatum
A fast-responding, “vigilance” signal process (amygdala + OFC).
A slower-responding, anticipated reward region (dorsal striatum).
Constitute a generalized system for decision-making under
uncertainty (including both risk and ambiguity).
Behavioral experiments with lesion patients show that the
OFC is necessary for distinguishing risk and ambiguity.
Ambiguity > Risk
QuickTime™ and a
TIFF (LZW) decompressor
are needed to see this picture.
Risk > Ambiguity
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are needed to see this picture.
Correlation of Behavior with
Imaging
u(x)  x 
  p, j  {a,r}  p
j
U(x, p)   ( p)u(x)
P r(y  1) 
1
1 exp U(x, p)  u(c)
LogLik(y )   y P r(y  1)
y y
(1 y)1 P r(y  1)
QuickTime™ and a
TIFF (LZW) decompressor
are needed to see this picture.
Lesion Patient Experiment
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Lesion patients allow us to assess the
necessity of a brain region for behavior.
Two groups
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OFC lesion: location of damage overlaps with
OFC activation.
Control lesion: temporal lobe patients, lesions do
not overlap with activation.
Groups matched on IQ, verbal abilities,
etiology.
Lesion Patient Experiment
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TIFF (LZW) decompressor
are needed to see this picture.
Risk and Ambiguity Attitudes
QuickTime™ and a
TIFF (LZW) decompressor
are needed to see this picture.
Conclusion
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Our results suggest
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Risk and ambiguity are product of a single system
Produced by two possibly competing processes
To distinguish between levels of uncertainty
With ambiguity and risk being limiting cases
The OFC is necessary for proper functioning of
the system.
Future Research
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Behavioral Typing (Ellsberg 1967)
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There are those who do not violate the axioms, or say they won’t,
even in these situations; such subjects tend to apply the axioms
rather their intuition.
Some violate the axioms cheerfully, even with gusto.
Others sadly but persistently, having looked into their hearts,
found conflicts with the axioms and decided, in Samuelson’s
phrase, to satisfy their preferences and let the axioms satisfy
themselves.
Still others tend, intuitively, to violate the axiom but feel guilty
about it and go back into further analysis.
Further establish direction of causality
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Exogenously stimulate the amygdala.
Look in special populations of striatal differences.
END