Different methods to define utility functions yield similar results but engage different neural processes

Area of Science:

• Neuroeconomics
• Cognitive Neuroscience
• Behavioral Economics

Background:

• Utility functions are central to economic theories but lack a universally accepted measurement method.
• Assessing the neural underpinnings of utility function determination is crucial for advancing economic modeling.

Purpose of the Study:

• To investigate and compare two economic methods for describing utility functions: a lottery game and a bisection task.
• To assess the neural correlates of these methods using response-locked event-related potentials (ERPs).

Main Methods:

• Utilized a lottery game with a 0.5 probability of winning to determine the certainty equivalent.
• Employed a standard bisection task for direct identification of subjects' utility functions.
• Measured response-locked event-related potentials (ERPs), specifically focusing on error-related negativity (ERN).

Main Results:

• The lottery task, particularly for choices distant from the indifference point, elicited a pronounced negativity similar to the error-related negativity (ERN).
• The bisection task did not produce a significant ERN, regardless of response accuracy.
• These findings suggest that lottery decisions possess greater subjective relevance, activating cognitive-emotional monitoring.

Conclusions:

• Decisions in the lottery task engage cognitive-emotional monitoring systems, unlike those in the bisection task.
• The bisection method appears unaffected by probability valuation or risk parameters.
• Combining lottery and bisection tasks can differentiate between payoff and probability valuation in economic decision-making.