Module 1: Introduction to Neuroeconomics Flashcards
Goal neuroeconomics
Measuring brain processes to better understand and predict economic choices
Temporal resolution
The accuracy with which one can measure when an event is occuring
Spatial resolution
The accuracy with which one can measure where an event is occuring
Invasiveness
Whether the equipment is located internally or externally
What is the difference in brain density between non-primates and primates?
For non-primates the correlation between brain size and neuron count is almosy perfect (bigger brain = more neurons). For primates you see more neurons than expected on brain size.
In which lobes is the cerebel cortex divided? (4) And what are their main functions.
- Frontal lobe (planning & choice)
- Parietal lobe (attention)
- Occipital lobe (seeing)
- Temporal lobe (hearing)
Why is the brain folded?
By folding you can put more matter into a small space
Corpus callosum
Structure that connects the two hemispheres (left and right), the nerves cross over in this structure
What is the main difference between the left and right hemisphere?
- The left hemisphere is more focused and involved in details.
- The right hemisphere is more involved in the bigger picture.
Where is the Ventromedial prefrontal cortex located?
- Behind the eyes and nose
- It is the most frontal part (prefrontal) of the frontal cortex and the most bottom part in the middle (ventromedial)
Name the functions of the Ventromedial Prefrontal Cortex (vmPFC)
- (long term) planning
- (social) decision making
- processing value
- integrating costs and benefits
- comparing different types of rewards
Why was Phineas Gage important for neuroscience?
- He was an example of someone with lesion damage, which learned us a lot about the vmPFC
- He had an accident where he ended up with a large iron rod through his head
- The brain damage led to changes of personality
- The lesion learned us that the damaged area was involved in planning, complex behavior, delaying gratification, decision making and moderating correct social behavior
What percentage of our brain do we actually use?
100%
Where is the Anterior Cingulate Cortex (ACC) located?
- Beneath the cortex
- On top of the Cortex Colosum
What are the functions of the Anterior Cingulate Cortex (ACC)?
- Involved in processing pain (therefore strong role in learning)
- Involved in losses (costs)
- Acts against negative feelings of taking risks (increased activity = increased risk taking)
- Computing negative expected value
Where is the Insula located?
Underneath the Temproal, Frontal and Parietal lobes
What are the functions of the Insula?
- Processing negative feedback from the body
- Aversive emotions (disgust)
- Perceiving risk (increased activity in aINS = decreased risk taking)
- Costs (regret, losses, risk, effort, pain)
What is the main function of the hippocampus?
Formation of new memories
Why was Henry Molaison (H.M.) important for neuroscience?
His hippocampus was removed to control his seizures, after the surgery he lost most of his memories and the ability to form new ones.
What is the difference between declarative and procedural memory?
- Declarative memory: remembering names, dates and facts (hippocampus)
- Procedural memory: remembering the physical process of how to do something (cerrebelum)
Where is the Amygdala located?
At the anterior end of the hippocampus on both sides
What are the functions of the amygdala?
- involved in emotions (fear, aggression)
- role in positive emotions and motivation
- involved in recognizing emotions in other people
How can an amygdala lesion manifest itself in someone’s behavior?
- Someone could have problems with experiencing fear
- It is also possible that people have problems in recognizing other people’s feelings
- People can show inappropriate behavior regarding the emotions of someone else
What does the basal ganglia consist of?
- Striatum (!)
- Globus Pallidus
- Substantia Nigra
- Subthalamic nucleus
What does the striatum consist of?
- Caudate
- Putamen
- Nucleus Accumbens (!)
What are the most important functions of the Striatum?
- Involved in reward processing and what is valuable to you
- Preferences
- Learning from positive events
- Detecting motivating properties of stimuli
Broca’s Aphasia
Problems with language production (vocal)
Wernickers Aphasia
Problems with language comprehension
Transcranial magnetic stimulation (TMS)
- Noninvasive stimulation of the brain caused by magnetic induction from a rapidly changing electrical current in a coil held over the scalp
- A temporarily virtual lesion
- By generating a magnetic field, the area underneath the device is disrupted
Dendrites
Part of the neuron that receives communication from other neurons, there are many dendrites on a single neuron
Axon
Part of the neuron that sends communication to other neurons, there is only one axon on a single neuron
Synapse
Small gap between neurons in which neurotransmitters are released, permitting signaling between neurons
Describe how communication between neurons work
- A presynaptic neuron (neuron before synapse) that is active, propagates an action potential down the length of the (presynaptic) axon
- The action potential reaches the axon terminal, leading to release of neurotransmitters into the synapse
- The neurotransmitters bind to the receptors of the (postsynaptic) dendrite or cell body and cause a synaptic potential (this potential is conducted passively)
- An action potential (active electrical current) will be triggered in the postsynaptic neuron when the summed passive synaptic potentials exceed a certain threshold
Cell recordings
By inserting a recording electrode in or on individual neurons, it is possible to measure action potentials in specific neurons
Electroencephalography (EEG)
Measurements of electrical signals generated by the brain through electrodes placed on different points on the scalp
Inverse problem
Infinite number of possible charge distributions in the brain could lead to same pattern on the surface
- further limits the ability to spatially pinpoint EEG
Volume conduction
The electrical activity has to travel through the brain and the skull and only then you can pick it up, this smears out the activity and makes it difficult to relocate
- further limits the ability to spatially pinpoint EEG
functional Magnetic Resonance Imaging (fMRI) working
fMRI measures the local blood flow in the brain, makes use of the fact that red blood cells with oxygen and without oxygen have different magnetic properties
BOLD response working
- When neurons become active they need more oxygen which is supplied by blood
- When the blood is consumed you can see a small drop of the BOLD signal (less oxygen in blood) (1)
- The loss of regional oxygen triggers an influx of oxygen-rich blood to that region (2)
- The BOLD signal dramatically increases (2) and later normalizes (3)
- Undershoot (4)
Voxel
- Volumetric pixel
- Representation of a volume in 3D space
- The smaller the voxel, the higher the spatial resolution
Reversed inference problem
The use of reasoning from brain activation to mental functions does not always take into account how selectively the area is activated by the mental process in question
- often brain areas are involved in several mental processes
Grandmother cell
A hypothetical neuron that just responds to one particular stimulus
- Example of Jennifer Aniston neuron»_space; responds maximally to Jennifer Aniston but also to her co-actors, by responding to multiple stimuli it couldn’t be a grandmother cellc
Structural imaging
Different types of tissue have different physical properties
- Static maps (physical structure of the brain)
- CT & MRI
Functional imaging
Neural activity produces local physiological changes in that region of the brain
- Dynamic maps (moment to moment activity)
- FNIRS, fMRI
Gyri
Raised folds of the cortex
Sulci
Buried grooves of the cortex
Limbic system
Cingulate cortex
Hippocampus
Amygdala
Rationality
The best possible way to act, with good reason for our actions
Expected Utility Theory
Theory of the rational decision maker, describes how people should make decisions by means of rational computations based on objective outcomes and probabilities, without cognitive limitations and emotions
Hyper rationality
People always make highly rational choices (not representable)
Bounded rationality
An uncertain future, bound to rationality, including cognitive and information processing constraints as well as imperfect information, will mean that people, at best, are able to act in a broadly reasonable rather than strictly rational way.
Substantive rationality
Rationality based on underlying mathematical process, but allows for subjective probabilities
Procedural rationality
Rationality of the processes used in arriving at decisions (as opposed to the decision itself)
Ecological rationality
Rationality is determined by the ecology of the environment in which decisions take place
Heuristics
Devices to reduce complexity of tasks and to form intuitive judgements of probability
Biases
Systematic mistakes that follow out of heuristics
Availability heuristic
We judge events to be more likely if occurrences of the event can be more easily retrieved
- Retrieves in biases: Retrievability bias, effectiveness of search, imaginability bias, illusory correlation and attention bias
Imaginability bias
- Follows out of availability heuristic
- Events that can be imagined easier are judged more likely
Retrievability bias
- Follows out of availability heuristic
- Events that can be recalled (retrieved) easier are judged more likely
Effectiveness of search
Identifying events quickly and easily leads to an upward bias in probability
Priming
increase the availability in one’s mind
Narrative persuasion
The power of narratives to change beliefs, attitude and behavior
Narrative transportation
Story receivers’ affective and cognitive responses, beliefs, attitudes and intentions from being swept away by a story and transported into a narrative world that modifies their perception of the world of origin
Representativeness
People judge the similarity between events and processes to judge probability
Regression to the mean
more extreme observations tend to be less extreme on the next occasion (mean reversion)
- Follows from representativeness
Illusion of validity
if data tells a story, we overestimate our ability to predict an outcome
Anchoring
The tendency to rely heavily on the firs piece of information offered (the anchor) when making decisions
- Assessment biases, confirmation bias, insufficient adjustment
Insufficient adjustment
Probability judgements are anchored to prior information or events and are not adjusted as information or context change
Assessment biases
Applying the anchoring heuristic on irrelevant information (the wheel of fortune)
Confirmation bias
Depending on the question (anchor) people can seek different information, to confirm the question
Associative activation
Ideas that are evoked together trigger many other ideas
Diminishing marginal utility
The same amount of money is less useful to an already wealthy person than it would be to a poor person
Underlying principles EUT (von Neumann & Morgenstern)
- Completeness (knowing what to prefer)
- Transitivity (liking A more than B, B more than C, A more than C)
- Continuity (measurement of utility)
- Independence (preference is independent of scaling of probability and adding of common outcome)
Two EUT failings
- Violations independence axiom
- Allais paradox (common consequence effect): if the
preference between two lotteries changes if the same
probability mass is shifted from one common outcome to a
different one - Common ratio effect
- Allais paradox (common consequence effect): if the
- Effect of framing
- Formulation of choice problems matters (Asian disease ex.)
Rabin’s critique on EUT
Plausible risk aversion for large outcomes implies near risk-neutrality for small and medium outcomes, which is not what is generally observed
Prospect theory (Tversky and Kahneman)
A framework which captures how people choose between different risky prospects
- Risk aversion for gains, risk seeking for losses
Certainty effect
A reduction of the probability of an outcome by a constant factor has more impact on the decision weight when the outcome was initial certain than when it was merely probable
Advantages of prospect theory
Explains:
1. Violations of independence (Allais paradox)
2. Violations of description invariance (framing effects)
3. Preferences for small and large gambles (Rabin)
Break-even effect
After losses, people tend to take more risk to achieve their reference point
House-money effect
after large gains, people are willing to take more risk, because losing “house money” does not hurt as much as losing “own money”
St Petersburg paradox
Isolation effect
People disregard common components in alternatives, whether those common components are the payoff or the probabilities
Dominant strategy
Strategy that is optimal no matter what the opponent does
Nash equilibrium
Optimal collective strategy in a game involving two or more players, where no player has anything to gain changing only their own strategy
Classical game theory
Predicts that a group of rational, self-interested players will make decisions to reach outcomes (NE) from which no player can increase their own payoff unilaterally
Types of tasks in game theory
- Bargaining tasks: the intial endowment provided varies across studies, and the proposer/investor are free to offer any amount of this investment
- Competitive games: two players generally make simultaneous decisions, with the monetary payoffs also varying across studies though they broadly correspond to the outcomes shown
Bargaining behavior
Examining responses to equality and inequality
- Dictator game (measuring pure altruism) and ultimatum game (examines strategic thinking)
