What you give is what you get: Payment of one randomly selected trial induces risk-aversion and decreases brain responses to monetary feedback
In economic studies, it is standard practice to pay out the reward of only one randomly selected trial (pay-one) instead of the total reward accumulated across trials (pay-all), assuming that both methods are equivalent. We tested this assumption by recording electrophysiological activity to reward feedback from participants engaged in a decision-making task under both a pay-one and a pay-all condition. We show that participants are approximately 12% more risk averse in the pay-one condition than in the pay-all condition. Furthermore, we observed that the electrophysiological response to monetary rewards, the reward positivity, is significantly reduced in the pay-one condition relative to the pay-all condition. The difference of brain responses is associated with the difference in risky behavior across conditions. We concluded that the two payment methods lead to significantly different results and are therefore not equivalent.
KeywordsEconomic research Risk behavior Payment method Reward positivity
The authors thank Natalie Gittner, Tabitha Mantey, Sophie-Marie Rostalski, and Cerstin Seyboldt for help with data acquisition.
B. Schmidt developed the study concept. All authors contributed to the study design. Testing and data collection were performed by L. Keßler and H. Hecht. B. Schmidt performed the data analysis and interpretation under the supervision of C. B. Holroyd. B. Schmidt drafted the manuscript, and C. B. Holroyd, J. Hewig, and W. H. R. Miltner provided critical revisions. All authors approved the final version of the manuscript for submission.
- Baker, T. E., & Holroyd, C. B. (2011). Dissociated roles of the anterior cingulate cortex in reward and conflict processing as revealed by the feedback error-related negativity and the N200. Biological Psychology, 87, 25-34. doi: https://doi.org/10.1016/j.biopsycho.2011.01.010 CrossRefGoogle Scholar
- Cameron, L. A. (1999). Raising the stakes in the Ultimatum Game: Experimental evidence from Indonesia. Economic Inquiry, 37, 47-59. doi: https://doi.org/10.1111/j.1465-7295.1999.tb01415.x CrossRefGoogle Scholar
- Cherniawsky, A. S., & Holroyd, C. B. (2013). High temporal discounters overvalue immediate rewards rather than undervalue future rewards: an event-related potential study. Cognitive, Affective and Behavioral Neuroscience, 13, 36-45. doi: https://doi.org/10.3758/s13415-012-0122-x CrossRefGoogle Scholar
- Donchin, E., & Coles, M. G. H. (1988). Is the P300 component a manifestation of context updating? Behavioral and Brain Sciences, 11, 355-425.Google Scholar
- Kreussel, L., Hewig, J., Kretschmer, N., Hecht, H., Coles, M. G., & Miltner, W. H. (2012). The influence of the magnitude, probability, and valence of potential wins and losses on the amplitude of the feedback negativity. Psychophysiology, 49, 207–219. doi: https://doi.org/10.1111/j.1469-8986.2011.01291.x CrossRefGoogle Scholar
- Lakens, D. (2013). Calculating and reporting effect sizes to facilitate cumulative science: a practical primer for t-tests and ANOVAs. Frontiers in Psychology. doi: https://doi.org/10.3389/fpsyg.2013.00863
- Miltner, W. H., Braun, C. H., & Coles, M. G. (1997). Event-related brain potentials following incorrect feedback in a time-estimation task: Evidence for a “generic” neural system for error detection. Journal of cognitive neuroscience, 9, 788–798. doi: https://doi.org/10.1162/jocn.19126.96.36.1998 CrossRefGoogle Scholar
- R Development Core Team. (2016). R: A language and environment for statistical computing [Computer software manual]. Vienna, Austria. Retrieved from http://www.R-project.org/ (ISBN 3-900051-07-0)
- Sato, A., Yasuda, A., Ohira, H., Miyawaki, K., Nishikawa, M., Kumano, H., & Kuboki, T. (2005). Effects of value and reward magnitude on feedback negativity and P300. Cognitive Neuroscience and Neuropsychology, 16, 407-411.Google Scholar
- Schmidt, B., Kanis, H., Holroyd, C. B., Miltner, W. H. R., & Hewig J. (2018). Anxious gambling: Anxiety is associated with higher frontal midline theta predicting less risky decisions. Psychophysiology. doi: https://doi.org/10.1111/psyp.13210