A Neuroimaging Study of Preference for Strategic Uncertainty

20 Pages Posted: 6 Mar 2012 Last revised: 5 Jul 2013

Robin Chark

National University of Singapore - Department of Marketing

Soo Hong Chew

National University of Singapore; National University of Singapore; HKUST

Date Written: July 4, 2013

Abstract

We study the preference for strategic uncertainty using neuroimaging when subjects play sequentially a combination of matching pennies and coordination games without feedback. The scanned subject has the option to ‘play’, in which case both receive outcomes according to their moves, or ‘not play’ and receive the same sure amount along with the ‘opponent’ outside the scanner for whom half the trials are relegated to a dice. Having a ‘no play’ option enables us to estimate the scanned subjects’ certainty equivalent under four types of uncertainties – game (matching pennies versus coordination) × play (strategic versus random). Our finding that subjects generally value playing coordination more than matching pennies provides experimental support for a preference for shared plight in the income inequality literature. We further find that this preference is moderated by whether subjects face strategic or random play by their opponents. Specifically, in facing a matching pennies game, subjects require an ‘ambiguity’ premium to play when the opponent makes a conscious move compared to a random move. Yet, they are willing to accept a discount to play coordination strategically rather than randomly. We employ a source-dependent expected model to analyze the behavioral and imaging data and find that the value of playing the various games to be encoded in the dorsal striatum. We further observe that activations in the amygdala and the orbital prefrontal cortex are modulated by the game × play interaction, extending previous finding of their association with decision making under ambiguity to the setting of strategic uncertainty.

Keywords: experimental economics, neuroeconomics, strategic uncertainty, source preference, decision theory

Suggested Citation

Chark, Robin and Chew, Soo Hong, A Neuroimaging Study of Preference for Strategic Uncertainty (July 4, 2013). Available at SSRN: https://ssrn.com/abstract=2016876 or http://dx.doi.org/10.2139/ssrn.2016876

Robin Chark (Contact Author)

National University of Singapore - Department of Marketing ( email )

NUS Business School
Mochtar Riady Building, BIZ 1, #08-16
Singapore, Singapore 119245
Singapore

Soo Hong Chew

National University of Singapore ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

National University of Singapore ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HKUST ( email )

Clear Water Bay
Kowloon, Hong Kong
China

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