8 Decision making

„a decision is a deliberative process that results in the commitment to a categorical proposition

meander = “schlängeln”

a premotor~, a prefrontal~, and a frontopolar part. Each may have a ventrolateral, a dorsolateral, a dorsomedial and a medial subdivision.

All actions had a “utility” or amount of happiness the action would bring to a person.

Decision-making was calculating the greatest utility:

• Measured pleasure and pain in terms of intensity and duration.

• Incorporated the probability that the event would occur.

• Likelihood that it would be followed by more of the same or the opposite.

• Estimated the number of people affected.

Homo oeconomicus is a theoretical person who always makes the same rational decisions and maximizes utility.

• H. oeconomicus has absolute preferences, never changing regardless of the comparison.

• H. sapiens however has relative preferences, which shift depending on the objects that are being compared.

• Homo sapiens is:

  • confused by uncertainty and risk

  • shows a framing effect and an endowment effect

  • has difficulty in assessing value in the future

• When confronted with a gamble with a moderate chance of success, people tend to be risk averse: Fear of disappointment.

• When there is a small chance of success, people tend to be risk seeking: Hope of large gain

• The curve has a different shape for gains and losses, and there is a discontinuity at the middle of the curve.

• The different shapes of the two curves indicate that humans may use different mechanisms for evaluating gains and losses.

• —> Homo sapiens is confused by risk

• Humans over-weigh the very small chances („million to one“) and thus behave „irrational“

= putting a decision into a specific context

• People can be manipulated into picking a specific option depending on the way the options are presented.

• Framing the question influences the behavior: If you ask in a way that stresses the potential gains, people will become more risk averse. If you however stress the losses, people become more risk seeking.

• Such framing effects are strong and often used in real life (commercial) decisions

• People demand a higher price to sell an object, than they would be willing to pay for the same object.

• Apparently, possession of an object increases (=endows) its value for the owner - Such framing effects are strong and often relevant in real life (commercial) decisions.

• that is why owner of houses ask prices way above the market price, and why ebay buyers are willing to go beyond their limit shortly before the end of an auction („it is almost mine, and thus worth more…“)

• Rewards that occur in the future have some risk of not being collected, so their value is discounted.

• This risk is reflected in the reduction of the value if it lies in the future: Delay discounting.

• The delay discounting curve is quite steep. The value of even a high reward drops rapidly to almost none, if the reward will be in the future.

• This is one of the reasons why humans choose options with immediate reward vs. better options with a delayed reward.

• One possible explanation: irrational decisions come from „defective brain circuits“.

• Supported by the attribution effect: Humans see their own behavior (and that of their own group!) as logically explained by the situation, whereas the behavior of others is explained by their character.

• Experimental evidence however does not support the „defective brain hypothesis“

System 1 (Intuitive)

• Works at a non-conscious, intuitive level.

• Uses parallel processing.

• Independent of intelligence and attention.

System 2 (Rational)

• Works at a conscious, explicit level.

• Uses sequential processing.

• Depends on intelligence and attention.

Human tendency: Decisions in the distant future are made rationally, but fast decisions are made irrationally.

Different neural systems are active for decisions in the distant future vs. fast decisions

• Dorsolateral prefrontal cortex

• Ventrolateral orbitofrontal cortex

• Lateral orbitofrontal cortex

• Intraparietal cortex

• Supplementary motor area

• Presupplementary motor area

including the medial prefrontal cortex, medial orbitofrontal cortex, ventral striatum, and left posterior hippocampus

orbitofrontal cortex

• Values into goals

• Goals into plans

• Plans into behavior and action

if the goal is for example to get nutrients, the internal value system might opt for a sugary, fatty meal, while the external value system labels this as „bad“ calories.

Brain activity for internal, subjective preference is in the ventromedial prefrontal cortex. When external factors are added (here in a soft drink comparison), activity shifts towards hippocampus and dorsolateral prefrontal cortex.

If the subject were an „ideal observer“, it would put the decision criterion at the intersection between the two distributions. The rate of „false positives“ and „false negatives“ should then be identical.

motor cortex

Often, this is done experimentally by offering money (“for which sum would you forego the meeting with friends”?).

In these decisions, both the subjective value and the delay of the „reward“ are essential.

The delay is factored in differently by different individuals – in impulsive people, a delayed reward has a very low subjective value.

The orbitofrontal cortex assembles information and assigns subjective value.