Risky business: the neuroeconomics of decision making under uncertainty

Abstract

Many decisions involve uncertainty, or imperfect knowledge about how choices lead to outcomes. Colloquial notions of uncertainty, particularly when describing a decision as 'risky', often carry connotations of potential danger as well. Gambling on a long shot, whether a horse at the racetrack or a foreign oil company in a hedge fund, can have negative consequences, but the impact of uncertainty on decision making extends beyond gambling. Indeed, uncertainty in some form pervades nearly all our choices in daily life. Stepping into traffic to hail a cab, braving an ice storm to be the first at work, or dating the boss's son or daughter also offer potentially great windfalls, at the expense of surety. We continually face trade-offs between options that promise safety and others that offer an uncertain potential for jackpot or bust. When mechanisms for dealing with uncertain outcomes fail, as in mental disorders such as problem gambling or addiction, the results can be disastrous. Thus, understanding decision making-indeed, understanding behavior itself-requires knowing how the brain responds to and uses information about uncertainty.

Figure 1

Brain regions implicated in decision making under uncertainty. Shown are locations of activation from selected functional magnetic resonance imaging studies of decision making under uncertainty. (a) Aversive stimuli, whether decision options that involve increased risk or punishments themselves, have frequently been shown to activate insular cortex (INS),,, and ventrolateral prefrontal cortex (vlPFC). (b) Unexpected rewards modulate activation of the striatum (STR),,,,, particularly its ventral aspect, as well as the medial prefrontal cortex (mPFC),,,. (c) Executive control processes required for evaluation of uncertain choice options are supported by dorsolateral prefrontal cortex (dlPFC), and posterior parietal cortex (PPC),. Each circle indicates an activation focus from a single study. All locations are shown in the left hemisphere for ease of visualization.

Figure 2

Neuronal correlates of risky rewards. (a) Midbrain dopamine neurons in monkeys increase firing in anticipation of probabilistically delivered juice rewards (after C.D. Fiorillo et al., 2003). (b) Neurons in posterior cingulate cortex preferentially signal uncertain rewards in a visual gambling task. RF, receptive field target. (c) Changes in neuronal activity following a change in the identity of the uncertain target mirrored the development of preferences for that target (b,c after A.N. McCoy and M.L. Platt, 2005).