Archives for category: Neuroeconomics

Neuroeconomics series part 5: How do we learn what we like?

September 5, 2014 //

Full rights and credits to the content extracted here from Dr Vasily Klucharev. For more information please head to https://www.coursera.org/course/neuroec

Have you ever wondered why you like your favourite restaurant?

At the sight of it alone, your brain does into overdrive releasing its favourite yummy drug, dopamine.

This key ingredient helps our brain know what we like, what we choose to buy/do/eat etc, activating reward pathways and helping us remember and learn each time what we like and don’t like.

But how?

Dopamine neurons helps us to know our predicted utility – i.e. based on your past experiences, what you expect to get out of a good meal at your favourite restaurant. Is it the wine? Is it the food? Is it the waiter/ress??

However, when that’s interrupted, or the cue isn’t as we expected, (for example if we experience bad food, or poor service) then we encounter a prediction error signal – a readjustment – and our brain learns. See the red lines above.

We learn not to go back there next time expecting the same quality meal.

So it’s quite nifty really. Dopamine helps us to modify our expectations and consequently change our behaviour, allowing us to learn to make different – and maybe better – decisions next time we see our favourtite restaurant, so we also don’t keep making the same mistakes.

Full rights and credits to the content extracted here from Dr Vasily Klucharev. For more information please head to https://www.coursera.org/course/neuroec

Full rights and credits to the content extracted here from Dr Vasily Klucharev’s course ‘Introduction to Neuroeconomics; how the brain makes decisions’ through the National Research University Russia. Available now as an online learning course through Coursera.com. For more information please head to https://www.coursera.org/course/neuroec

Tags behavioural economics, brain, coursera, decision making, dopamine, Neuroeconomics

Categories Behavioural Economics, brain, Neuroeconomics, Senses

Neuroeconomics series part 4: How our brains know we want a sportscar

August 29, 2014 //

Full rights and credits to the content extracted here from Dr Vasily Klucharev. For more information please head to https://www.coursera.org/course/neuroec

In this mini-series of Neuroeconomics, we look at purchasing decisions of consumers and how the activity in the brain can predict purchasing behaviour.

While some of us may think we don’t want a car, let alone car what type we’d choose, Susan Erk’s study in 2002 showed that in fact many of us can have extreme car category preference wether we know the exact brand name or not.

In the study she asked male subjects to rate different categories of cars – sportscars, limousines and small cars.

The brain activity of the Nucleus Accumbens (see below) was found to correlate directly to the car category preference; the more the brain reacted, the more they liked the ‘sportscar’, and the inverse was true for the least liked ‘small car’.

Full rights and credits to the content extracted here from Dr Vasily Klucharev. For more information please head to https://www.coursera.org/course/neuroec

The category of product alone was enough to strongly activate the NA part of the brain, and signal a specific purchase decision, regardless of the lack of a specific brand to consider.

This is an interesting insight into the potential powerful effects of marketing to associate values to general items and spur a purchase decision within a category alone. How much value do “luxury” brands need to carry if the category itself can carry them so far?

Tags behavioural economics, brain, brand choices, brands, car choices, consumer psychology, coursera, marketing, Neuroeconomics, purchasing behaviour

Categories Behavioural Economics, brain, EEG, gender, Gender brains, male brain, MRI, Neuroeconomics, science

Neuroeconomics series part 3: Our brains know what we want before we do

August 22, 2014 //

So far we’ve gathered that the level of activity in our Nucleus Accumbens shows our predicted values.

But can this can lead to actual financial decisions? Can we predict a person’s decision to buy a product based on their brain activity?

The answer is yes.

Our brain has an expected value – what it expects us to enjoy when it gets a cue like seeing our favourite chocolate bar in the shops. (That’s the point where we think “Yum that will taste good when I eat it”.)

Full rights and credits to the content extracted here from Dr Vasily Klucharev. For more information please head to https://www.coursera.org/course/neuroec

And so our brain buzzes with excitement, and this activity in the Nucleus Accumbens, leading to a purchase of the chocolate bar.

Conversely, when people don’t buy it, the activity is less – as seen below. We’re just not so buzzed to pay the cash for the reward.

Full rights and credits to the content extracted here from Dr Vasily Klucharev. For more information please head to https://www.coursera.org/course/neuroec

In Brian Knutson’s study using fMRI to predict financial choices, subjects were asked to press a buzzer when they saw a cue in order to receive money.

When that monetary figure was $5, the subject’s neurons fired more, but when it was $1, it fired less. So when the person expected to get more money, the brain showed activity related to what anticipated gain they thought they would get.

Full rights and credits to the content extracted here from Dr Vasily Klucharev’s course ‘Introduction to Neuroeconomics; how the brain makes decisions’ at https://www.coursera.org/course/neuroec

Most interesting was that the neurons firing was actually strongest before the actual outcome – i.e. in the anticipation of it.

Full rights and credits to the content extracted here from Dr Vasily Klucharev. For more information please head to https://www.coursera.org/course/neuroec

So it seems we can’t quite help but buy that little black dress, great-smelling cake, refreshing cocktail or any other pleasurable experience we’ve had before.

We’re hard wired to prefer it, and act on that decision again. And again. And again.

Tags behavioural economics, brain, consumer psychology, coursera, dopamine, financial decisions, financial incentives, Neuroeconomics, nucleus accumbens

Categories Behavioural Economics, brain, Emotions, MRI, Neuroeconomics, science

Neuroeconomics series part 2: Where we make our choices

August 15, 2014 //

Nucleus Accumbens where we choose what we want

Our Nucleus Accumbens. Where we decide to buy that little black dress. Full credits to Dr Vasily Klucharev. For more information head to https://www.coursera.org/course/neuroec

In this mini-series of Neuroeconomics, we look at purchasing decisions of consumers and how the activity in the brain can predict purchasing behaviour.

So it turns out we’re all a little bit hard-wired for rewards.

We love a little bit of pleasure.

Our Nucleus Accumbens, located in the ventral striatum, does loads to help us choose what we want, when we want it.

It’s conveniently connected to the hippocampus (memory), frontal cortex (higher order decision making), amygdala (motivation and encodes potential costs of our decisions) and VTA which produces the all-important pleasure seeking chemical, dopamine.

So in short the Nucleus Accumbens (NA) is a hefty emotional calculator with access to good data to calculate values for our decisions.

What a perfect region to make some purchasing decisions!

Yes I love that car. But is it too expensive for my budget this month? And will it in my garage?

So how do we know there even is a relationship between our brain’s activity and us choosing pleasurable rewards?

Wolfram Shultz’s study in 2006 showed that the more the animal got their reward, the more the dopamine neurons in the NA fired. However, after a while they stopped firing when the reward was presented, and started to fire in anticipation of the reward. So it was expecting the reward.

Full credits to Dr Vasily Klucharev. For more information head to https://www.coursera.org/course/neuroec

So our brain learns.

Show us a cue for the reward – like the smell of a cake baking – and the brain releases our dopamine in pleasure-driving mode.

The cake needn’t be eaten yet, but the cue kicks us off.

What does this mean for addiction?

Exactly the same thing.

Self-administered drugs (e.g. cocaine, amphetamine) have been proven to hijack the dopamine system in animals and directly evoke a pleasant reaction by manipulating the pleasure system to mirror these expectant brain patterns.

So in short, our NA dopamine neurons will fire more when the person values something they know, even if they haven’t tasted it yet.

Tags behavioural economics, brain, cocaine, dopamine, Neuroeconomics, nucleus accumbens

Categories Behavioural Economics, brain, MRI, Neuroeconomics, science

Neuroeconomics series part 1: Why we want what we want

August 13, 2014 //

Neuroeconomics series part 1. Thanks to http://www.mybrainsolutions.com/ for the great image

In this LGM mini-series of Neuroeconomics, we look at purchasing decisions of consumers and how the activity in the brain can predict purchasing behaviour.

For those of you scratching your heads at home, what is Neuroeconomics?

It’s a ground-breaking new area of research that’s got psychologists, economists, and neuroscientists putting their heads together to try and understand the neurobiological mechanisms for decision making.

Luckily, everybody’s decision making process involves the same various stages: interpreting choice, evaluating choice, making a choice, and evaluating the results of that choice, all the while learning from that process.

If you don’t like the brand of cola you chose that last time, you will remember not to choose it again.

But if you did like it, what happens when your brain has to choose the next time around?

Well it seems your brain will encode a value to that cola, and that encoding will predict your decision next time you’re standing in front of the fridge (cool!).

Full credit to Vasily Klucharev at the National Research University Russia. For more information head to https://www.coursera.org/course/neuroec

The problem is, values are completely subjective. Someone who values diet might choose cola by the amount of calories it has. Someone who is on a budget will choose the cheapest. Someone aware of their image might choose the ‘cooler’ brand. It all depends on your values.

So Neuroeconomics has its own measure of values called Neuroeconomics utility – which measures the physical firing rate of neurons in your brain.

And this firing rate has a direct relationship to how hard you will work for rewards. The more you value something (like pleasure) the more your brain fires, the more you will choose to work for it. Make sense huh? But it can get a bit extreme.

Full rights and credits to the content extracted here from Dr Vasily Klucharev. For more information please head to https://www.coursera.org/course/neuroec

Olds’ study from 1958 showed how rats worked furiously to stimulate the pleasure centers of their brain, increasing the firing rates of these neurons. In fact it got so high, they died from the fun. Yep, collapsed from sheer exhaustion. Similar patterns have been shown in humans where patients ignore their own personal hygiene and family commitments just to stimulate their own pleasure centers. Ew. (Portenoy et al., 1986).

So what is this pleasure center? Well it’s called the Nucleus Accumbens. And it’s full of that yes-I’ll-have-another-glass-of-wine-thankyou-and-okay-another-slice-of-cake, pleasure-seeking milk, dopamine.

But more on that to come in part 2.

Tags behavioural economics, brain, coursera, dopamine, National Research University Russia, Neuroeconomics, nucleus accumbens, Vasily Klucharev

Categories Behavioural Economics, brain, Neuroeconomics, science

Neuroeconomics series part 5: How do we learn what we like?

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Neuroeconomics series part 4: How our brains know we want a sportscar

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Neuroeconomics series part 3: Our brains know what we want before we do

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Neuroeconomics series part 2: Where we make our choices

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Neuroeconomics series part 1: Why we want what we want

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