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Evaluation of Probabilities and Brain Activity - An EEG-Study

  • Ralf Morgenstern
  • Marcus Heldmann
  • Thomas Münte
  • Bodo Vogt
Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 5819)

Abstract

This paper focuses on the problem of probability weighting in the evaluation of lotteries. According to Prospect Theory a probability of 0.5 has a weight of smaller than 0.5. We conduct an EEG experiment in which we compare the results of the evaluation of binary lotteries by certainty equivalents with the results of the bisection method. The bisection method gives the amount of money that corresponds to the midpoint of the utilities of the two payoffs in a binary lottery as it has been shown previously. In this method probabilities are not evaluated. We analyzed EEG data focused on whether a probability is evaluated or not. Our data show differences between the two methods connected with the attention towards sure monetary payoffs, but they do not show brain activity connected with a devaluation of the probability of 0.5.

Keywords

Prospect Theory Probability Weighting Expect Utility Theory Certainty Equivalent Bisection Method 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2009

Authors and Affiliations

  • Ralf Morgenstern
    • 2
  • Marcus Heldmann
    • 1
  • Thomas Münte
    • 1
  • Bodo Vogt
    • 2
  1. 1.Otto-von-Guericke-University Magdeburg, NeuropsychologyMagdeburgGermany
  2. 2.Faculty of Economics and ManagementOtto-von-Guericke-University MagdeburgMagdeburgGermany

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