the neuroeconomics of personal and impersonal exchange mccabe
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The Neuroeconomics of Personal and
Impersonal Exchange
KevinA.McCabe
ProfessorofEconomicsandLaw
GeorgeMasonUniversity
www.neuroeconomics.net (Center)
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THECENTERFORTHESTUDYOF
NEUROECONOMICSATGEORGEMASONUNIVERSITY
mailto:[email protected]://www.neuroeconomics.net/http://www.neuroeconomics.net/mailto:[email protected] -
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5
Support clique
15
Sympathy group
35
Hunter-gatherer overnight camps
150
Hunter-gatherer clans
500
Megaband
1500
Tribe
Evolution and Social ExchangeCSN
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Passingham (2002)
Social brain hypothesis (Dunbar, 1998)
Social Cognition andPrefrontal Cortex (PFC)SN
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Earl K.Mil ler,THE PREFRONTAL CORTEX AND COGNITIVE CONTROL,NATURE REVIEWS NEUROSCIENCE (1)2000, pp. 59 85.
Prefrontal Cortex (PFC)CSN
Inputs Actions
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What we ask?
How have our brains adapted to solvethe problems of personal and impersonalexchange?
How does the way our brains workdetermine how our economic systems
work?
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The Transition to Markets Based
on Douglass Norths Research
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Two Kinds of Exchange
Personal Impersonal
Localized Trade Long Distance TradeWho you know What you know
Reciprocity Rule of LawExclusive Groups Inclusive Groups
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Ultimatum Game: Bargaining
Investment Game: Trust
Studying Personal Exchange
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DictatorGameControls
0
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1
0 1 2 3 4 5
Amount Sent
%Freque
ncy
0
0.2
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0.8
1
0 1 2 3 4 5
Amount Sent
%Freque
ncy
Hoffman, E., McCabe, K., Shachat, K., Smith, V. (1994).
Preferences, property rights and anonymity in bargaining
games. Games and Economic Behavior, 7(3) 346- 380.
Ask subject how much they want to send another subjectof the Ten to One Hundred dollars they have been given.
Single Blind Double Blind
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(1) Two Players 1 and 2, are given
10( 100) to split.
(2) Player one makes a proposal to
player
(3) Player two then accepts or rejects.
(4) If rejected they both get zero.
The Ultimatum Game
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0
2
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12
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1 2 3 4 5
Divide-Random $10
Ultimatum Game Results
N = 24
Frequency
Offer
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Hoffman, E., McCabe, K., Shachat, K., Smith, V., 1994.
Preferences, property rights, and anonymity in bargaining
games. Games and Economic Behavior 7, 346380.
Compare standard divide 10 Ultimatum Game withrandom
assignment to 10 Ultimatum Game where player ones earn
the right to be first mover in a contest and where subjects are
placed in an exchange context.
Property Rights
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0
2
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1 2 3 4 5
0
2
4
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1 2 3 4 5
Property Right Results
N = 24
Offer Offer
Frequency
Divide-Random $10 Property Right $10
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The Investment Game
Berg, Joyce, John Dickhaut, Kevin
McCabe (1995), Trust, Reciprocity,
and Social History, Games andEconomic Behavior, 10, pp. 122-142.
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The Investment Game
Room A
Room B
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$10
3K
K
X$10
- K
+ 3K
X
- X
+ X
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Design
Play the Investment Game Once
With A Random Counterpart
and a Random Role Both Start With $10 (show up fee)
Investor invests his or her show up fee
Decisions made Double Blind
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0
5
10
15
20
25
30
Surplus
Amount Sent
Amount Returne
$5.16
$15.48$4.66
Results: N = 32
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Social History Treatment
Inexperienced Players
See What First Group Did (as avg.return by amount sent)
Everything Else the Same
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0
5
10
15
20
25
30
Surplus
Amount Sent
Amount Returne
$5.36
$16.08
$6.46
Social History Results: N = 28
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Kevin McCabe, Daniel Houser, Lee Ryan, Vernon Smith,
and Theodore Trouard, A Functional Imaging Study of
Cooperation in Two-Person Reciprocal Exchange,
Proceedings of the National Academy of Sciences, (98)2001,
pp. 11832-11835.
Imaging Two Person
Exchange
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COMPUTER
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UMAN
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UMAN >
COMPUTER
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The neural basis of economic decision making in the
Ultimatum Game.
Alan G. Sanfey*, James K. Rilling*, Jessica A. Aronson,
Leigh E. Nystrom, Jonathan D. Cohen
Science, June 2003
* authors note: these two authors contributed equally to
this manuscript; authorship was determined arbitrarily
Imaging the Ultimatum
Game
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Main Results
Individuals exhibit an negative emotionalresponse to unfair offers and must controlthis response to accept unfair offers.
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UnfairFair Human Offers
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Subjects44 volunteers (22 males, 22 females; age: 28.3 7.1 years;education:17.3 2.1 years)
Frank Krueger, Kevin McCabe, Jorge Moll, Nikolaus
Kriegeskorte, Roland Zahn, Maren Strenziok, ArminHeinecke, Jordan Grafman, Neural correlates oftrust, Proceedings of the National Academy ofSciences, Early Edition December 4, 2007.
Two Systems for Trust
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Conditional Trust Strategy
Unconditional Trust Strategy
Individuals use two trust strategies withdifferent benefits and costs:
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Main Results
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Simultaneous scanning
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(10,15) (5,5)(0,25)
Game
6s
Blank Screen
Processing &Decision-Making
Jitter
2-6s
Blank Screen
Blank Screen
Processing &Decision-Making
Blank Screen
6s
(10,15) (5,5)(0,25)
Procedure
Result
4s
Processing
Processing
(10,15) (5,5)(0,25)
(10,15) (5,5)(0,25)
Introduction
2s
time (s)
DM1
DM1 DM2
DM1 DM2
ScannerII
ScannerI
VTG
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20
40
60
80
100
Stage I Stage II Stage I Stage II
Non-Defectors Defectors
LowMediumHigh
Trust(%)perPayoff-Type
*P
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Paracingulate Cortex
3 5
t(43)
(BA9/32; 5,39,22)
Trust>Control
-0.2
0.0
0.2
0.4
0.6
0.8
Stage I Stage II
Non-Defectors Defectors
*P
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b
3 5
Septal Area
Unconditional Trust
Goal Knowledge
dmPFC
b
3 5
Krue er et al. Proc Natl Acad Sci2007.
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Building Maintenance
Activation
Results: Unconditional Trust StrategyCSN
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b
3 5
Ventral Tegmental Area
Conditional Trust
Goal Knowledge
dmPFC
b
3 5
Krue er et al. Proc Natl Acad Sci2007.
0.0
0.10.2
0.3
0.4
0.5
0.6
0.7
Building Maintenance
A
ctivation
Results: Conditional Trust StrategiesCSN
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3
Mediator
Conclusions: Trust StrategiesCSN
Conditional Trust
VTA
Unconditional Trust
Septal Area
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Studying Impersonal Exchange
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Institutions
Markets
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NA
MPFC
The Dopamine System
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Error Prediction in the Brain
Dopamine neurons (n = 188) from
the ventral midbrain areas were
recorded when monkeys were
shown a stimulus indicating theprobability of a juice reward and
then either received or didnt
receive the reward.
Schultz W, Dayan P, Montague PR. 1997. A
neural substrate of prediction and reward.Science 275:159399
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Conditioned
Stimulus (CS)
Reward (R)
No Reward
Reward (R)
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Data on Firing Rates
Temporal differencelearning
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Knutson, B., Adams, C. M., Fong, G. W., & Hommer, D. (2001a).
Anticipation of increasing monetary reward selectively recruits
nucleus accumbens. Journal of Neuroscience, 21(RC159), 1-5.
Knutson, B., Fong, G. W., Adams, C. M., Varner, J. L.,
& Hommer, D. (2001b). Dissociation of reward anticipation
and outcome with event-related FMRI. NeuroReport,
12, 3683-3687.
Reward and Money
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Task
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Rt. Nucleus Accumbens Rt. Medial Prefrontal Cortex
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Resulting Bold Response
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Sensitivity to Scale
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Stock Market Bubbles: When
Good Computations Go Bad
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Typical Bubble
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Bubbles in the Scanner
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Terry Lohrenz; Kevin McCabe; Colin Camerer; P. Read
Montague. Neural signature of fictive learning signals
in a sequential investment task, Proceedings of the
National Academy of Sciences, May 29th, 2007,
104(22), pp. 9493-9498. Early Edition (Open Access)
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Task
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Reveal Bar On Submit Reveal
.75 sec. random .75 sec.
Amount in market
Change inportfolioPortfolio Value
Price History
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Fictive Learning Signal
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The fictive learning signal looksat what could have beenachieved if you had made yourearlier choice with newerinformation.
If prices go up how much gainwould you have made if youwere 100% in the market.
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Fictive Error Predicts Change
in Investment
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Separation of Fictive and
Temporal Difference Learning
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CSN
Three Systems for Exchange
Emotional EmpathyNetwork
Dorsal Striatum
Ventral Striatum
Goal Directed Learning
Theory of Mind
Anterior
Paracingulate
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Personal and Impersonal
Exchange
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Social Actor-Critic(who you know)
Selfish Actor-Critic(what you know)
InstitutionsOrganizations
OptimalControl
OptimalUse
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Ventral Striatum
Dorsal Striatum
DLPFC
An
terior
Pa
racingulate
Choosing An Actor-Critic
(Representation)
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Caudate
Social Actor-Critic Selfish Actor-Critic
Stimulus
ResponseResponse
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VentralStriatum
DorsalStriatum
DLPFC
Anterio
r
Choosing Between Actor-Critics
(Conflict Resolution)
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Caudate
Social Actor-Critic Selfish Actor-CriticStimulus
Response
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When Does Impersonal
Exchange Fail?
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The answer in part is that our adapted
mind defaults to personal exchange.
When impersonal exchange institutions
are perceived to be too uncertain or not
self serving we fall back on our adaptedpropensity for personal exchange. This
creates a cognitive conflict between
optimal use and optimal control.
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Thank You
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