Philosophical transactions of the Royal Society of London. Series B, Biological sciences
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Philos. Trans. R. Soc. Lond., B, Biol. Sci. · Jan 2010
Herding, social influence and economic decision-making: socio-psychological and neuroscientific analyses.
Typically, modern economics has steered away from the analysis of sociological and psychological factors and has focused on narrow behavioural assumptions in which expectations are formed on the basis of mathematical algorithms. Blending together ideas from the social and behavioural sciences, this paper argues that the behavioural approach adopted in most economic analysis, in its neglect of sociological and psychological forces and its simplistically dichotomous categorization of behaviour as either rational or not rational, is too narrow and stark. Behaviour may reflect an interaction of cognitive and emotional factors and this can be captured more effectively using an approach that focuses on the interplay of different decision-making systems. In understanding the mechanisms affecting economic and financial decision-making, an interdisciplinary approach is needed which incorporates ideas from a range of disciplines including sociology, economic psychology, evolutionary biology and neuroeconomics.
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Regret helps to optimize decision behaviour. It can be defined as a rational emotion. Several recent neurobiological studies have confirmed the interface between emotion and cognition at which regret is located and documented its role in decision behaviour. ⋯ We propose a general understanding of how regret and decision-making are connected in terms of regret being modulated by rational antecedents of choice. Regret and the modification of behaviour on its basis will depend on the criteria of rationality involved in decision-making. We indicate current and prospective lines of research in order to refine our views on how regret contributes to optimal decision-making.
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Rational-choice theory tries to explain behaviour on the assumption that individuals optimize. Some forms of irrational behaviour can be explained by assuming that the individual is subject to hedonic, pleasure-seeking mechanisms, such as wishful thinking or adaptive preference formation. In this paper, I draw attention to psychic mechanisms, originating in the individual, which make her worse off. I first consider the ideas of counterwishful thinking and of counteradaptive preference formation and then, drawing heavily on Proust, the self-poisoning of the mind that occurs through the operation of amour-propre.
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Philos. Trans. R. Soc. Lond., B, Biol. Sci. · Jan 2010
Rational choice, neuroeconomy and mixed emotions.
Experimental psychology has shown differences between predictions of theory of decision and human choices. Emotions like regret can partly explain these differences. Neuroimagery used in combination with behavioural economics (neuroeconomics) has been used in order to try to disentangle the different emotional and rational factors (regret, rejoicing, reward, costs, uncertainty, trade-off between positive and negative aspects of different options). ⋯ Not only might we feel a positive affect in punishing unfair partners, but mixed emotions can, for example, combine transmutation of previous anxiety into relief and elation by comparison with another less exciting option (elating relief). At the level of complexity of these mixed emotions--which we formally represent by comparisons between 'unexpected utilities' and expected ones--the main biases that Kahnemann and Tversky have shown can be explained. In spite of the complexity of these mixed emotions, some of these hypotheses might be partially tested by brain imagery.