How the Brain Makes a Bet
You’re making plans for a casual game of racquetball with a friend. You’re looking forward to the challenge, until his taunting competitiveness gives way to a friendly wager. He bets you that you won’t win, and loser will give the victor his watch. You believe that you and your friend are pretty equally matched. How will you decide whether to give in to his mocking and take the bet? It all depends on how great his watch is.
Prospect theorists believe that when faced with a 50/50 chance, the potential gain in a bet has to be twice as much as the potential loss before the person will take the wager. This is because people tend to be loss averse and attach greater weight to losses than wins (Kahneman & Tversky, 1979).
A recent study by Tom, Foxx, Trepel, and Poldrack (2007) examined which areas of the brain are engaged when you decide whether to risk your watch in a racquetball court. Their study looked at two hypotheses to explain loss aversion. In the first hypothesis, separate brain systems process gains and losses, with losses activating systems in the brain processing emotions like fear or anxiety. In the second hypothesis, the same brain system processes gains and losses.
The researchers used an fMRI to scan participants (nine female and seven male) as they engaged in decisions whether to accept 256 distinct gambles. All wagers had a 50/50 chance of winning from $10 to $40 or losing $5 to $20. The participants did not learn about the outcomes of their gambles during the scanning because the researchers did not want reactions to outcomes affecting the brain activity observed while deciding whether to place wagers.
The participants did not on average accept wagers unless the potential gain was at least twice the potential loss, as supported by prospect theory. The researchers observed that wagers with more potential gain activated areas in the brain associated with anticipating reward. Greater losses, however, did not activate any other brain systems, and neither gains nor losses created increased activity in the limbic system (the limbic system is involved in processing emotions).
The results found support the hypothesis that both gains and losses are processed in the same area of the brain. The researchers found that there was a greater decrease of activity in that area of the brain responding to greater possible loss than there was an increased level of activity in response to greater possible gain. This suggests that the brain is actually weighting wins and losses differently. In addition, those participants who took more risks with their wagers were less neurally sensitive to the possible gains and losses.
There were several limitations to the study, including the small sample size and inability to create a realistic gambling environment within the scanner. However, the study indicates that the average person may have a predisposition to be risk averse. Future studies may include disordered gamblers to determine whether their brain systems react differently to possible gains and losses than the average person’s brain systems.
