Heldmann, Marcus (Otto-von-Guericke University Magdeburg) Vogt, Bodo () (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) Heinze, Hans-Jochen (Otto-von-Guericke University Magdeburg) Münte, Thomas (Otto-von-Guericke University Magdeburg)
Abstract
Although the concept of utility is fundamental to many economic theories, up to now a generally accepted method determining a subject’s utility function is not available. We investigated two methods that are used in economic sciences for describing utility functions by using response-locked event-related potentials in order to assess their neural underpinnings. For defining the certainty equivalent (CE), we used a lottery game with probabilities of 0.5, for identifying the subjects’ utility functions directly a standard bisection task was applied. Although the lottery tasks’ payoffs were only hypothetical, a pronounced negativity was observed resembling the error related negativity (ERN) previously described in action monitoring research, but this occurred only for choices far away from the indifference point between money and lottery. By contrast, the bisection task failed to evoke an ERN irrespective of the responses’ correctness. Based on these findings we are reasoning that only decisions made in the lottery task achieved a level of subjective relevance that activates cognitive-emotional monitoring. In terms of economic sciences, our findings support the view that the bisection method is unaffected by any kind of probability valuation or other parameters related to risk and in combination with the lottery task can, therefore, be used to differentiate between payoff and probability valuation.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number
09014.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: