Differences in cognitive control between real and hypothetical payoffs

Ralf Morgenstern (), Marcus Heldmann and Bodo Vogt

Theory and Decision, 2014, vol. 77, issue 4, 557-582

Abstract: This study focuses on the question of neural differences in the evaluation of hypothetical and real payoffs. Hypothetical payoffs are not incentive compatible and are, therefore, not considered to be reliable. Behavioral differences between the evaluation of hypothetical and real payoffs can be attributed to this incentive effect. Because real payoff mechanisms are not always applicable in the field, it is necessary to know in which way both types of payoffs affect evaluation processes. In order to delineate the cognitive processes related to hypothetical bias, we conducted a within-subject EEG experiment with hypothetical and real payoffs. A certainty equivalent elicitation method for measuring risk attitudes was performed in which subjects had to indicate whether they preferred playing a lottery or receiving a sure payoff instead. At the behavioral level, subjects were more risk averse for real payoff choices, confirming a hypothetical bias. EEG-derived event-related potentials provide evidence that the processes underlying these differences in evaluations differ. A higher N2 component for hypothetical payoffs revealed increased cognitive control for hypothetical decisions. These neuronal underpinnings indicate additional evaluation processes in hypothetical choice paradigms, which can explain the shift in risk attitude toward the expected value of a lottery. Copyright Springer Science+Business Media New York 2014

Keywords: Hypothetical bias; Cognitive control; N2; Decisions under risk (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11238-013-9408-x

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