Binary sensitivity of theta activity for gain and loss when monitoring parametric prediction errors

Several theories have been proposed to account for the medial frontal activity that is elicited during the evaluation of outcomes. Respectively, these theories claim that the medial frontal response reflects (i) the absolute deviation between the value of an outcome and its expected value (i.e. an absolute prediction error); (ii) the deviation between actual and expected outcomes, with a specific sensitivity to outcomes that are worse than expected (i.e. a negative prediction error); (iii) a binary evaluation in terms of good and bad outcomes. In the current electroencephalography study, participants were presented with cues that induced specific predictions for the values of trial outcomes (a gain or loss of points). The actual outcomes occasionally deviated from the predicted values, producing prediction errors with parametrically varying size. Analysis of the medial frontal theta activity in response to the outcomes demonstrated a specific sensitivity to the occurrence of a loss of points when a gain had been predicted. However, the absolute deviation with respect to the predicted value did not modulate the theta response. This finding is consistent with the idea that outcome monitoring activity measured over medial frontal cortex is sensitive to the binary distinction between good and bad outcomes.