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Path dependence in risky choice: Affective and deliberative processes in brain and behavior

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  • Hytönen, Kaisa
  • Baltussen, Guido
  • van den Assem, Martijn J.
  • Klucharev, Vasily
  • Sanfey, Alan G.
  • Smidts, Ale

Abstract

Decision-makers show an increased risk appetite when they gamble with previously won money, the house money effect, and when they have a chance to make up for a prior loss, the break even effect. To explore the origins of these effects, we use functional magnetic resonance imaging to record the brain activities of subjects while they make sequential risky choices. The behavioral data from our experiment confirm the path dependence of choices, despite the short trial duration and the many task repetitions required for neuroimaging. The brain data yield evidence that the increased risk appetite after gains and losses is related to an increased activity of affective brain processes and a decreased activity of deliberative brain processes.

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  • Hytönen, Kaisa & Baltussen, Guido & van den Assem, Martijn J. & Klucharev, Vasily & Sanfey, Alan G. & Smidts, Ale, 2014. "Path dependence in risky choice: Affective and deliberative processes in brain and behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 566-581.
    • Handle: RePEc:eee:jeborg:v:107:y:2014:i:pb:p:566-581
    DOI: 10.1016/j.jebo.2014.01.016
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    Cited by:

    1. Gerlinde Fellner-Röhling & Sabine Kröger & Erika Seki, 2021. "Information Regime Changes and Path Dependence - An Experimental Analysis of Public Goods Contributions in Heterogeneous Groups," CIRANO Working Papers 2021s-13, CIRANO.
    2. Deaves, Richard & Kluger, Brian & Miele, Jennifer, 2018. "An exploratory experimental analysis of path-dependent investment behaviors," Journal of Economic Psychology, Elsevier, vol. 67(C), pages 47-65.
    3. Annabel B Losecaat Vermeer & Alan G Sanfey, 2015. "The Effect of Positive and Negative Feedback on Risk-Taking across Different Contexts," PLOS ONE, Public Library of Science, vol. 10(9), pages 1-13, September.
    4. Martin S. Shapiro & Paul C. Price & Edward Mitchell, 2020. "Carryover of domain-dependent risk preferences in a novel decision-making task," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 15(6), pages 1009-1023, November.
    5. repec:cup:judgdm:v:15:y:2020:i:6:p:1009-1023 is not listed on IDEAS
    6. Elgin, Ceyhun & Torul, Orhan & Aydoğdu, Ertunç, 2021. "Risky choices in a natural experiment from Turkey: Var Mısın Yok Musun?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 92(C).

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    More about this item

    Keywords

    House money effect; Break even effect; Neuroeconomics; Functional magnetic resonance imaging (fMRI); Brain imaging; Risky choice;
    All these keywords.

    JEL classification:

    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics

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