Neural Responses to Sanction Threats in Two-Party Economic Exchange

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.