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Neural Responses to Sanction Threats in Two-Party Economic Exchange

Author

Listed:
  • Jian Li

    () (Department of Psychology, New York University)

  • Erte Xiao

    () (Department of Social and Decision Sciences, Carnegie Mellon University)

  • Daniel Houser

    () (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)

  • P. Read Montague

    () (Menninger Department of Psychiatry & Behavioral Sciences, Baylor College of Medicine)

Abstract

Sanctions are used ubiquitously to enforce obedience to social norms. Recent field studies and laboratory experiments have demonstrated, however, that cooperation is sometimes reduced when incentives meant to promote pro-social decisions are added to the environment. Although a variety of explanations have been suggested, the neural foundations of this effect have not been fully explored. Using a modified trust game, we find trustees reciprocate relatively less when facing sanction threats, and the presence of sanctions significantly reduces trusteeÕs brain activities involved in social reward valuation (VMPFC, LOFC, and Amygdala), while simultaneously increases brain activities in parietal cortex previously implicated in rational decision making. Moreover, we find that neural activity in trusteeÕs VMPFC area predicts her future level of cooperation under both sanction and no-sanction conditions, and that this predictive activity can be dynamically modulated by the presence of a sanction threat.

Suggested Citation

  • Jian Li & Erte Xiao & Daniel Houser & P. Read Montague, 2009. "Neural Responses to Sanction Threats in Two-Party Economic Exchange," Working Papers 1012, George Mason University, Interdisciplinary Center for Economic Science.
  • Handle: RePEc:gms:wpaper:1012
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Houser, Daniel & Xiao, Erte, 2010. "Inequality-seeking punishment," Economics Letters, Elsevier, vol. 109(1), pages 20-23, October.
    2. Jingnan (Cecilia) Chen & Daniel Houser, 2013. "Promises and Lies: An Experiment on Detecting Deception," Working Papers 1038, George Mason University, Interdisciplinary Center for Economic Science, revised Feb 2013.
    3. Marie-Laure Cabon-Dhersin & Nathalie Etchart-Vincent, 2011. "Cooperation: the power of a single word? Some experimental evidence on wording and gender effects in a Game of Chicken," Working Papers hal-00741973, HAL.
    4. Samuel Bowles & Sandra Polania-Reyes, 2011. "Economic incentives and social preferences: substitutes or complements?," Department of Economics University of Siena 617, Department of Economics, University of Siena.
    5. Xiaofei Pan & Daniel Houser, 2011. "Social Approval, Competition, and Cooperation," Levine's Working Paper Archive 786969000000000299, David K. Levine.
    6. Erte Xiao & Daniel Houser, 2014. "Sign Me Up! A Model and Field Experiment on Volunteering," Working Papers 1043, George Mason University, Interdisciplinary Center for Economic Science.
    7. Xiao, Erte & Houser, Daniel, 2011. "Punish in public," Journal of Public Economics, Elsevier, vol. 95(7), pages 1006-1017.
    8. S. Bowles & S. Polania-Reyes., 2013. "Economic Incentives and Social Preferences: Substitutes or Complements?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
    9. repec:eee:jeborg:v:136:y:2017:i:c:p:15-28 is not listed on IDEAS
    10. Eric Schniter & Timothy Shields, 2013. "Recalibrational Emotions and the Regulation of Trust-Based Behaviors," Working Papers 13-16, Chapman University, Economic Science Institute.
    11. Xiao, Erte, 2012. "Justification and cooperation," MPRA Paper 36120, University Library of Munich, Germany.
    12. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," UMASS Amherst Economics Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics.
    13. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series 2734, CESifo Group Munich.

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