Authors: Baba Shiv, Stanford University; George Loewenstein, Carnegie Mellon University; Antoine Bechara, University of Iowa; Hanna Damasio, University of Iowa; Antonio R. Damasio, University of Iowa
Publication: Psychological Science
Focus Area: Decision Making, Emotion, Consumer Behavior
Relevance: People use both rational thought and emotion to evaluate risk as they make decisions. Further insight into the mechanisms by which emotion and rational thinking interact may help identify persuasion techniques and inform prevention programs for fraud victims.
Summary: Emotions have been shown to both improve and hinder decision making, depending on the circumstances. In this study, subjects with brain lesions in areas related to emotion made better choices than normal subjects in a gamble designed to reflect a real-life investment. The experiment was designed to reward people who invested money in each of 20 rounds, regardless of their success or failure in preceding rounds.
- This study builds on fact that people become increasingly risk averse when they are presented with a series of gambles one after another. This tendency is called myopic loss aversion, and can influence people even when the potential reward is greater than the potential loss.
- The target subjects – those with disrupted emotional processing – performed better than normal subjects in this test and invested equally after wins and losses.
- Normal subjects were more risk averse than the target subjects throughout the experiment. Within the normal subject group, participants were more risk averse after losing a preceding round than after a winning round – even though the outcome of the preceding round had no influence on the odds in the next round.
Author Abstract: Can dysfunction in neural systems subserving emotion lead, under certain circumstances, to more advantageous decisions? To answer this question, we investigated how normal participants, patients with stable focal lesions in brain regions related to emotion (target patients), and patients with stable focal lesions in brain regions unrelated to emotion (control patients) made 20 rounds of investment decisions. Target patients made more advantageous decisions and ultimately earned more money from their investments than the normal participants and control patients. When normal participants and control patients either won or lost money on an investment round, they adopted a conservative strategy and became more reluctant to invest on the subsequent round; these results suggest that they were more affected than target patients by the outcomes of decisions made in the previous rounds.