Abstract

http://ssrn.com/abstract=2385857
 


 



Path Dependence in Risky Choice: Affective and Deliberative Processes in Brain and Behavior


Kaisa Hytönen


Laurea University of Applied Sciences

Guido Baltussen


Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Martijn J. Van den Assem


VU University Amsterdam - Faculty of Economics and Business Administration

Vasily Klucharev


Erasmus University Rotterdam (EUR) - Rotterdam School of Management; Radboud University Nijmegen; National Research University Higher School of Economics

Alan G. Sanfey


University of Arizona

A. Smidts


Erasmus Research Institute of Management (ERIM)

February 2014

Journal of Economic Behavior and Organization, Forthcoming

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.

Number of Pages in PDF File: 44

Keywords: house money effect, break even effect, neuroeconomics, functional magnetic resonance imaging (fMRI), brain imaging, risky choice

JEL Classification: D87

Accepted Paper Series





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Date posted: January 28, 2014 ; Last revised: March 1, 2014

Suggested Citation

Hytönen, Kaisa and Baltussen, Guido and Van den Assem, Martijn J. and Klucharev, Vasily and Sanfey, Alan G. and Smidts, A., Path Dependence in Risky Choice: Affective and Deliberative Processes in Brain and Behavior (February 2014). Journal of Economic Behavior and Organization, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2385857

Contact Information

Kaisa Hytönen
Laurea University of Applied Sciences ( email )
Ratatie 22
Vantaa, FI-01300
Finland
Guido Baltussen
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )
P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
Martijn J. Van den Assem
VU University Amsterdam - Faculty of Economics and Business Administration ( email )
De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
Vasily Klucharev
Erasmus University Rotterdam (EUR) - Rotterdam School of Management ( email )
Rotterdam
Netherlands
Radboud University Nijmegen ( email )
Nijmegen, 6500 HK
Netherlands
National Research University Higher School of Economics ( email )
Myasnitskaya street, 20
Moscow, Moscow 119017
Russia
Alan G. Sanfey
University of Arizona ( email )
Tucson, AZ 85721
United States
Ale Smidts (Contact Author)
Erasmus Research Institute of Management (ERIM) ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
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