The Neural Basis of Economic Decision-Making in the Ultimatum Game

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Introduction:

The nascent field of neuroeconomics seeks to ground economic decision making in the biological substrate of the brain. We used functional magnetic resonance imaging of Ultimatum Game players to investigate neural substrates of cognitive and emotional processes involved in economic decision-making. In this game, two players split a sum of money;one player proposes a division and the other can accept or reject this. We scanned players as they responded to fair and unfair proposals. Unfair offers elicited activity in brain areas related to both emotion (anterior insula) and cognition (dorsolateral prefrontal cortex). Further, significantly heightened activity in anterior insula for rejected unfair offers suggests an important role for emotions in decision-making.

Standard economic models of human decisionmaking (such as utility theory) have typically minilliized or ignored the influence of emotions on people’s decision-making behavior, idealizing the decision-maker as a perfectly rational cognitive machine. However, in recent years this assumption has been challenged by behavioral economists, who have identified additional psychological and emotional factors that influence decision-making (1, 2), and recently researchers have begun using neuroimaging to examine behavior in economic games (3). This study applies functional neuroimaging techniques to investigate the relative contributions of cognitive and emotional processes to human social decision-making.

Ultimatum Game

The limitations of the standard economic model are effectively illustrated by empirical findings from a simple game known as the Ultimatum Game. In the Ultimatum Game, two players are given the opportunity to split a sum of money. One player is deemed the proposer and the other, the responder. The proposer makes an offer as to how this money should be split between the two. The second player (the responder) can either accept or reject this offer. If it is accepted, the money is split as proposed, but if the responderejects the offer, then neither player receives anything. In either event, the game is over.
The standard economic solution to the Ultimatum Game is for the proposer to offer the smallest sum of money possible to the responder and for the responder to accept this offer, on the reasonable grounds that any monetary amount is preferable to none. However, considerable behavioral research in industrialized cultures indicates that, irrespective of the monetary sum, modal offers are typically around 50% of the total amount. Low offers (around 20% of the total) have about a 50% chance of being rejected (4-8). This latter, quite robust, experimental finding is particularly intriguing, emonstrating that circumstances exist in which people are motivated to actively turn down monetary reward.

Personal Reflection:

The data sources for this article also involve brain neurology and psychology. This article uses games as a medium to analyze how people respond to different economic decisions on a biological basis. The study uses games as a media to aid in the experiment successfully. In this game, two players share a sum of money equally; one player offers the allocation and the other can accept or reject it. In contrast to the rational conclusions reached by the computer, humans usually reject economic decisions that seem reasonable. To analyze this phenomenon, the researchers scanned the players’ responses to fair and unfair offers. Biologically based changes in brain activity were produced when players made offers that were rejected. As a summary, the control variables approach used in the study is informative.

Reference:

Sanfey, A. G., Rilling, J. K., Aronson, J. A., Nystrom, L. E., & Cohen, J. D. (2003). The neural basis of economic decision-making in the ultimatum game. Science, 300(5626), 1755–1758. https://doi.org/10.1126/science.1082976