Emotion in economic decisions

When it comes to making a decision — even one that seems to involve no more than simple self-interest — how you feel is as important as what you think, and the two are not necessarily compatible. Brain scans performed during a psychological experiment show that your choice may depend on the balance of activity in the emotion and thinking centers of the brain.

The experiment is called the Ultimatum Game. Two players have the opportunity to split $10. One of them, the proposer, can offer the recipient any amount from $1 to $10. If the recipient accepts, both collect. If the recipient rejects the proposal, neither gets anything. Pure self-interest dictates that the proposer should offer as little as possible and the recipient should accept whatever is offered.

Experimenters acting as the proposers played the game nearly 200 times with different recipients. They pretended that another person was making the offers, while actually using a computer to choose at random by a predetermined formula — five dollars 50% of the time, three dollars 10% of the time, two dollars and one dollar 20% of the time each.

As long as recipients thought they were negotiating with a real person, they almost always accepted offers of $3 or more, but rejected offers of $2 or less about half the time. They felt cheated, and were resentful enough to act against their own economic interest.

During these experiments, brain scans indicated activity in the recipients’ dorsolateral prefrontal cortex, a region that governs deliberation and working memory. Activity was particularly high when the offer was "unfair" ($3 or less). The active prefrontal cortex indicated a high demand for cognitive activity. Unfair offers apparently stimulated that region more because contrary emotional impulses had to be overcome.

Unfair offers also stimulated the anterior insula, a region associated with disgust, anger, and other unpleasant emotions. When the offer was rejected, the insula became more active than the dorsolateral prefrontal cortex. And it was sensitive to the degree of unfairness — most active in response to a $1 offer.

When recipients were told the truth — that the offers were being generated by a computer-determined formula — they always accepted, and showed no brain activity indicating emotional disturbance.