Understanding Decision Making Using Game Theory and Neuroscience
By looking at mathematical decision models such as Game Theory combined with psychology and neuroscience that study human behavior and how the brain works, one is able to better understand decision making. While experiments are able to find what someone is most probable to choose in a situation such as risky investments, there is a much more complex societal context in which these types of decisions are made. In order to better understand more complicated decision making, one has to consider both the mathematical reasoning and the environment in which decisions are made.
Human behavior ofter does not conform to what would be predicted by game theory. Often the Nash Equilibria, the best choice for the player, is not the one that is chosen in reality. Alan Sanfey, of University of Arizona, provides an example of this in the case of the “Ultimatum Game.” The premise of the game is that two people are to split some money, one person makes an offer of how to split the money and the second person can choose to decline or accept this offer. If the second person refuses, neither of the two people get any money. If both people are acting only in their own self interests, it would make sense that the first person would split the money as much as they can in their favor and the second person will always accept if they are offered more than zero dollars. For example, if the sum was a million dollars, the first person would divide it so they could keep $999,999 and the second person would still accept the offer because $1 is still a better deal than nothing. However, this is not what happens in practice. Often the first person will offer a more fair split of the money, a good number offered a 50/50 split. Also, the second person will sometimes reject the offer if they think it is an unfair deal. While, it is illogical to reject the offer, if the second person feels they are not being treated fairly they will reject the offer. Human behavior does not always match models as predicted by game theory, this provides insight that there is more than logical reasoning at work in decision making.
Taking a look at the science of how our brain makes decisions offers greater insight into why the outcomes in reality do not always match the outcomes predicted by game theory. Sandy explains, “the mesolimbic dopamine system, and single-cell recordings from neurons in the striatum, a major projection site of midbrain dopamine cells” are some of the biological ways in which the brain rewards itself. It has been observed that the reward is often correlated with the reward in real life, the greater the physical reward is the more the brain rewards itself using these systems, the brain works similarly with punishments. This internal reward system is a way for our brain to reinforce good decision making. Game theory predicts that people will act in their own self interests, however the brain rewards cooperation. There is evidence that the brain rewards itself more when “reciprocated cooperation” occurs. So in cases such as the prisoner’s dilemma there is a higher chance that people will cooperate even though the Nash equilibrium predicts that the two players will not work together. Neurology helps us understand why game theory does not always mirror reality.
Emotions can play a large role in decision making. For example, a person with negative emotions may be more likely to offer an unfair offer in the Ultimatum game. Sanfey explains that a study that examined the unfairness of players in the Ultimatum game “found brain areas, primarily the anterior insula, that exhibited greater activation as the unfairness (i.e., inequity) of the offer increased.” He goes on to explain that people showed more activation when interacting with other people and not as much when interacting with a computer. When making decisions with people we don’t just use pure logic, there are many factors of brain chemistry, emotions, and societal interactions. While game theory and neurology can both start to explain what motivates decision making, it is the intersection of the two studies that can try to develop a deeper understanding of how people make choices.
Source: http://science.sciencemag.org/content/318/5850/598.full