Effects of context on decision-making

It is well-known that the evaluation of current risky decisions is influenced both by the prior history of outcomes and also by current emotional, social, and financial states. In this line of research, we investigate the neural mechanisms underlying such contextual effects on risk attitudes. Participants play economic games in the fMRI scanner while the social or financial context is manipulated.

We show that a network of brain areas known to be involved in risky decision-making (i.e. the Anterior Cingulate Cortex and the Insula) is highly susceptible to context effects and that activity in this neural network predicts context-dependent risky decision-making. Ongoing work focuses on the context effects of status on risky decision making. In another project we study framing effects on the evaluation of the price people are willing to pay for a product.

The effects of prior history of outcomes were studied in Hytonen et al. (2014). Decision-makers show an increased risk appetite when they gamble with previously won money (the house money effect) and when they have a chance to make up for a prior loss (the break even effect). Our brain data yield evidence that this increased risk appetite after gains and losses is related to increased activity of affective brain processes and a decreased activity of deliberative brain processes.

A follow-up project studies how context shapes the evaluation of price, for example in framing products as free.