Prospect theory does not describe the feedback-related negativity value function.

Area of Science:

• Neuroscience
• Cognitive Science
• Decision Science

Background:

• Humans exhibit biases in decision-making, notably overweighting losses and experiencing diminishing marginal utility of gains, as described by prospect theory.
• Previous research suggests midbrain dopamine neurons encode prediction errors, crucial for learning and decision-making.
• Functional magnetic resonance imaging (fMRI) studies have explored the neural underpinnings of prospect theory's value function.

Purpose of the Study:

• To investigate whether prospect theory's behavioral effects are reflected in neural signals of prediction error.
• To examine the neural coding of prediction errors using the feedback-related negativity (FRN), an electroencephalography (EEG) component linked to midbrain prediction error signals.

Main Methods:

• Participants' subjective satisfaction with outcomes was recorded.
• Electroencephalography (EEG) was used to measure the feedback-related negativity (FRN) in response to various outcomes.
• Behavioral responses and neural data were analyzed to assess sensitivity to gains, losses, and marginal utility.

Main Results:

• Participant-reported satisfaction aligned with prospect theory predictions, showing overweighting of losses and diminishing marginal utility.
• The feedback-related negativity (FRN) did not show prospect-theoretic effects.
• FRN exhibited greater sensitivity to potential gains than losses and lacked an effect of marginal utility.

Conclusions:

• Neural prediction error signals, as indexed by the FRN, do not fully capture the biases observed in human decision-making under prospect theory.
• Discrepancies between behavioral choices and neural responses suggest distinct mechanisms underlying subjective value assessment and prediction error computation.