Financial Incentives Differentially Regulate Neural Processing of Positive and Negative Emotions During Decision-Making

28 Pages Posted: 16 Aug 2016

See all articles by Anne M. Farrell

Anne M. Farrell

Miami University Farmer School of Business - Department of Accountancy

Joshua Goh

Government of the United States of America - National Institutes on Aging

Brian J. White

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: August 2016

Abstract

Research on emotion regulation has largely focused on how explicit emotion regulation techniques affect neural activity and choice. However, contextual features of decision environments could serve as implicit prompts to regulate emotions. We examine how financial incentives, a common feature of many decision environments, regulate positive and negative emotions when those emotions conflict with the economics of available alternatives. In a context-rich fMRI experiment, participants chose between investment projects proposed by hypothetical colleagues to whom they had either had or not had prior emotional reactions; choices based on emotion were less economically-desirable. Participants made these choices twice — once in a fixed wage context, and once in a financial incentive context in which pay is based on the economic outcomes of the projects chosen. Relative to choices in which no emotion is involved, in the fixed wage context, neural activity is greater when choices involve positive emotion than negative emotion. By contrast, in the financial incentive context, neural activity is lower when choices involve positive emotion than negative emotion. Analyses correlating neural responses to behavioral outcomes indicate that the greater the neural responses (i.e., the cognitive effort required to regulate emotion), the lower the frequency of economically-desirable choices.

Keywords: Positive and negative emotion; emotion regulation; financial incentives; compensation

Suggested Citation

Farrell, Anne M. and Goh, Joshua and White, Brian J., Financial Incentives Differentially Regulate Neural Processing of Positive and Negative Emotions During Decision-Making (August 2016). Available at SSRN: https://ssrn.com/abstract=2823856

Anne M. Farrell (Contact Author)

Miami University Farmer School of Business - Department of Accountancy ( email )

800 East High Street
3094 Department of Accountancy / MSC 1002
Oxford, OH 45056
United States

Joshua Goh

Government of the United States of America - National Institutes on Aging ( email )

Bethesda, MD 20892
United States

Brian J. White

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

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