Neuroeconomics and the Ultimatum Game: A Glimpse into the ...

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Neuroeconomics and the Ultimatum Game: A Glimpse into the Rationale of Fairness and its Role in the Brain Adam Widman

Introduction If a child is crying, a neuroscientist may say the tears are the result of a long pathway of neurotransmitters, synapses, axons, and action potentials. An evolutionary psychologist may argue that tears are an evolved behavior to request help from others. An economist may say the child is trying to maximize utility. Human decision-making can be modeled quite differently depending on the perspective from which it is studied. The nascent field of Neuroeconomics seeks to find the brain mechanisms that underlie economic decision making to produce a general theory on human behavior (Glimcher et al. 2004). Through neuroeconomics, researchers hope to tie together methods of thought in economics, psychology, and neuroscience as well as resolve problems within and between the disciplines. The Ultimatum Game is a frequently studied economic paradox that has also become the subject of much attention in neuroeconomics. Within the game, a sum of money is to be divided between two participants. A proposer allocates how the money is to be split between the two players, while a responder can either accept or reject the proposer’s allocation. If the responder accepts, the money is split between the two players as the proposer dictates. If the responder rejects, both players receive nothing. The game consists of only one round. Conventional economic theo-

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ry assumes that individuals in the role of responder are self-interested, rational utility-maximizers and should therefore accept any non-zero offer, as this leaves them economically better off than if they were to reject the offer and receive no compensation. Empirical results, however, differ. Proposers most frequently offer to split the sum of money equitably rather than keep most for themselves, while responders reject low, unfair offers frequently, even when large sums of money are involved. For example, when proposers offer responders 20% of the total sum to be divided, responders reject the offer about 50% of the time (Sanfey et al. 2003). Through rejection, individuals seem to be sacrificing their own economic well-being due to their distaste for unfair offers. Accordingly, the game presents a unique neuroeconomic opportunity to study the concept of fairness and how it is manipulated in the brain. Researchers use the Ultimatum Game to study why individuals are motivated to demand fair treatment. Some speculate that the demand for fair treatment is an emotional response to unfair offers, rooted in anger and frustration with the proposer. Others suggest that it is a highly cognitive, intellectually elegant response. This debate has sparked a flood of new research into the brain and how it manipulates the concept of fairness during decision-making.

The Prefrontal Cortex

Much of the neuroeconomic research performed on fairness in the Ultimatum Game examines the prefrontal cortex (PFC), an immensely complicated area of the brain. Cited as a center for higher cognitive function, the PFC is significantly larger in humans than any other species, including the chimpanzee. It is loosely described as a center for information integration, the planning of behavior, and higher motor function, though subdivisions of the PFC have differing functionalities. The PFC is further divided into the ventromedial prefrontal cortex (VMPC), the dorsolateral prefrontal cortex (DLPFC) and the anterior cingulate cortex (ACC). Currently, the VMPC and the DLPFC are two trendy areas for Ultimatum Game research. The VMPC is a center for social and emotional decision-making and contributes to the processing of social and emotional feedback and cues. Consistent with this role, the VMPC receives neuronal input from all sensory modalities and outputs to central autonomic effectors that regulate the body (Tranel et al. from Gazzaniga). Though the VMPC is often studied in an emotional context, it is also a critical center for evaluation, as activity in the VMPC is often correlated with expected reward and valuation of items (Rushworth et al. 2008). If the VMPC is frequently studied in relation to emotion and value, then the DLPFC is a model for cognition. It is known as a center for executive control and the ma-

Stanford Journal of Neuroscience

Undergraduate Research nipulation of temporarily stored memory, known as working memory. Patients with DLPFC lesions have trouble multitasking, demonstrating the region’s role in focus and conflict mediation (Smith and Jonides from Gazzaniga). A complex information-processing center, the DLPFC has less direct communication with other parts of the brain than the VMPC.

Fig. 1. Medial view of the left half of a human brain, with the front of the brain on the right side of the image. The human ventromedial prefrontal cortex is shown in red. From Glimcher, Paul W., and Aldo Rustichini. “Neuroeconomics: The Consilience of Brain and Decision,” Science.Vol. 306 (2004), pp. 451 The Prefrontal Cortex in Ultimatum Game Studies The role of both the VMPC and the DLPFC in fairness behavior within the Ultimatum Game has been analyzed through functional Magnetic Resonance Imaging (fMRI), lesion patient studies, and Repetitive Transcranial Magnetic Stimulation (rTMS) therapy, three prominent neuroeconomic research techniques. fMRI demonstrates which areas of the brain are most active during a specific activity. Sanfey et al. conducted fMRI studies of participants responding to fair and unfair offers and found that the ACC, DLPFC, and anterior

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insula were substantially more active during unfair, human offers than fair human or unfair computer offers (2003). The authors suggest that when participants consider unfair offers the cognitive aspects of the task are modeled in the DLPFC and urge individuals to make as much money as possible. This activity in the DLPFC conflicts with a negative emotional response to the unfair offer modeled in the anterior insula, an area of the brain frequently cited as a center for feelings of emotion (Damasio 2003). The ACC is hypothesized to mediate the conflict between the two brain parts. Accordingly, Sanfey’s fMRI study offers the suggestion that the paradox of the Ultimatum Game is derived from a conflict between cognitive and emotional responses to unfairness, with the more powerful of the two ultimately deciding whether or not the responder will accept the offer. While fMRI results produce an engaging portrait of why individuals fail to act in their economic selfinterest when rejecting offers, more recent studies using lesion patients and rTMS offer different viewpoints. Koenigs and Tranel conducted a study comparing rejection rates within the Ultimatum Game between VMPC lesion patients and control subjects to determine how damage to the VMPC impacts rejection rates (2007). VMPC lesion patients produced significantly higher rejection rates for a range of unfair offers. Increases in rejection rates for VMPC lesion patients relative to control subjects also correlated with the unfairness of offers, suggesting that the VMPC regulates the negative emotions that unfair offers generate. The results, which portray VMPC lesion patients as more irritable than the general population, are surprising in the con-

text of other Koenigs studies that demonstrate VMPC lesion patients to be “hypo-emotional.” Koenigs et al. found that VMPC lesion patients are more likely than control subjects to advocate emotionally averse behaviors if the behaviors lead to an increase in aggregate welfare (2007). For example, as a group lesion patients are more likely to advocate pushing an individual off of a bridge to save the lives of many others from a train wreck than their control counterparts. Koenigs speculates that the difference between the results of the two studies may have to do with the perception of self vs. others within the VMPC, as in the Ultimatum Game study the emotional response is self-centered while in the moral judgment study it is directed outward.

Fig. 2 Overall group acceptance rates of unfair ($3, $2, and $1) offers. The bars represent the proportion of accepted offers (y-axis) for each subject group (x-axis). Error bars indicate 95% confidence intervals for the probability of acceptance. Across all unfair offers, the VMPC group’s acceptance rate was lower than those of the NC group (p = 0.081) and BDC group (p = 0.020). From Koenigs, Michael and Daniel Tranel. “Irrational Economic Decision-Making After Ventromedial Prefrontal Damage: Evidence from the Ultimatum Game,” Journal of Neuroscience, Vol. 4, No.4 (2007), pp. 954

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Undergraduate Research Stark differences between studies are not surprising within the context of the VMPC, an especially convoluted region of the brain. Lesion studies have identified the VMPC as crucial to functions such as guessing, sensitivity to future reward, and even brand reference, themes that seem difficult to reconcile (Elliot et al. 1999; Bechara et al. 2000; Koenigs and Tranel 2007). Damasio et al. (1990) suggest that VMPC lesions simply cause sociopathic behavior that is difficult to predict or characterize. Though the role of the VMPC in Ultimatum Game behavior is important, complex, and unresolved, Knoch et al. recently used rTMS, a technique that uses magnetic waves to temporarily disrupt function in a localized area of the brain, to study the DLPFC’s role in the Ultimatum Game. The results challenge Sanfey’s hypothesis that the DLPFC is the area of the brain that supports self-interested economic behavior in response to unfair offers (2006). Using rTMS to disrupt functionality in the right DLPFC, the authors found that the resulting loss of function caused a decrease in rejection rates of unfair offers. The authors hypothesize that promoting long-term fairness by rejecting unfair offers is a higher cognitive task than accepting offers that provide short-term economic gains, and that right DLPFC function is necessary to offset the desire for financial gain in favor of more noble fairness related behaviors. The study also found that patients ability to judge the fairness of offers did not change during disruption of the DLPFC, demonstrating that more lenient rejection rates of unfair offers among rTMS subjects were not due to an inability to judge fairness. The study demonstrates that the DLPFC is critical for the implemen-

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tation of rejection behavior but not for situational judgment.

Fig. 3 Behavioral responses and fairness judgments (means ± SEM) related to the most unfair offer in the human offer condition. (A) Acceptance rates across treatment groups. Subjects whose right DLPFC is disrupted exhibit a much higher acceptance rate than those in the other two treatment groups (Mann-Whitney U tests, two-tailed, P < 0.05). (B) Perceived unfairness across treatments (1 = very unfair; 7 = very fair). From Knoch, Daria, Alvaro Pascual-Leone, Kaspar Meyer, Valerie Treyer, and Ernst Fehr. “Diminishing Reciprocal Fairness by Disrupting the Right Prefrontal Cortex,” Science. Vol. 314 (2006), pp. 829 Current Theories on Decision Making in the Prefrontal Cortex Current theories on fairness related decision-making in the PFC are contentious. Greene proposes a ‘dual-process’ theory of judgment during decision-making (2007). In this theory, emotional responses are contained within the VMPC and are pitted against cognitive responses in the DLPFC. Overcoming a strong emotional response requires increased cognitive control, and vice versa. While this theory assigns very clear roles to the DLPFC and VMPC during decision-making, it does not explain the heightened emotional response that VMPC lesion patients demonstrate during

the Ultimatum Game. Moll and Oliviera-Souza focus extensively on this contradiction in their response to Greene’s theory (2007). They argue that the VMPC is not a center for emotional processing within the brain but is instead a center for prosocial sentiments, or sentiments favorable to social cooperation. The authors choose to view the VMPC as an evolved brain center for social values because VMPC lesion patients are more punishing towards proposers in the Ultimatum Game study and less empathetic during the moral judgment study. While Moll and Oliviera-Souza present a more consistent hypothesis than Greene, it is unclear if VMPC lesion patients are truly punishing proposers when they reject offers or simply placing a high value on implementing fairness through rejection. Accordingly, the proposed idea that the VMPC serves as a center for prosocial thought during decision-making demands further verification. Fairness in an Evolutionary Context The function of the VMPC and DLPFC within the Ultimatum Game as determined by fMRI, lesion, and rTMS studies appears quite complex. It is difficult to determine if unfair offers present a conflict between a cognitive desire to implement fairness related behaviors over short-term economic interest or a less refined negative emotional response pitted against a desire for economic gain. Many look for evolutionary arguments to support their case. Nowak et al. demonstrate through computer simulation that if a responder’s history of rejecting offers can be tracked, proposers will evolve toward making increasingly fair offers in future games (2000). If


Undergraduate Research responders may reject their offer if it is unfair, then the risk of walking away from the game with nothing is transferred to the proposer. Over time, proposers compensate for this risk by making increasingly fair offers, so it is in the long-term evolutionary interest of responders to reject unfair offers. Such evidence introduces the significance of the concept of fairness as an evolved behavior and the view of rejection of unfair offers as an evolved response designed to promote fairness in society. Recent primate studies also give insight into the evolution and cognitive nature of fairness related behaviors present in the Ultimatum Game. Jenson et al. studied chimpanzee responses to unfair offers in a limited Ultimatum Game in which the proposer was allowed to select from a finite amount of food distributions and the responder could either accept or reject by choosing whether or not to accept his portion of the food (2007). In this study, economic self-interest appeared to dominate any other concerns, as chimpanzee acceptors accepted their food regardless of whether or not the proposer’s distribution was equitable. Ethological studies in primates can be highly circumstantial, so perhaps the chimpanzees disinterest in fairness implementation behavior was a result of artificial experimental conditions. Additionally, there is a strong social component to Ulitamtum Game play, and differences in social structures between chimpanzees and humans make the findings less relevant for humans. Nonetheless, the findings from the study suggest that humans and their enlarged PFCs evolved the ability to implement higher fairness related behaviors over more immediate economic temptations.

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Fig. 4 Illustration of the testing environment. The proposer, who makes the first choice, sits to the responder’s left. The apparatus, which has two sliding trays connected by a single rope, is outside of the cages. (A) By first sliding a Plexiglas panel (not shown) to access one rope end and by then pulling it, the proposer draws one of the baited trays halfway toward the two subjects. (B) The responder can then pull the attached rod, now within reach, to bring the proposed food tray to the cage mesh so that (C) both subjects can eat from their respective food dishes (clearly separated by a translucent divider). From Jensen, Keith, Josep Call, and Michael Tomasello. “Chimpanzees are Rational Maximizers in an Ultimatum Game.” Science, Vol. 318 (2007), pp. 107

Fig. 5. Rejection rates (% of trials) of 8/2 offers in the four games for chimpanzees in this study (black bars) and for human participants (white bars) [data are from (23)]. Jensen, Keith, Josep Call, and Michael Tomasello. “Chimpanzees are Rational Maximizers in an Ultimatum Game.” Science, Vol. 318 (2007), pp. 108

Conclusions: A Look Into the Future of Neuroeconomics Because of its simplicity and relevance as an economic paradox, the Ultimatum Game appears to be an ideal way to garner factual information about how economic decisions are made. The VMPC and DLPFC are among a host of brain regions involved in decision-making, but a close analysis of both leaves plenty of room for debate over the nature of fairness implementation in the brain. Overall, current evidence from human and primate studies suggests that fairness implementation is a higher cognitive, and thus more DLPFC oriented, task than succumbing to economic self-interest. Data from Knoch’s rTMS studies demonstrates that the DLPFC has a specific functional role in implementing fairness related neural processes. Additionally, chimpanzees are our closest evolutionary relatives and appear in Jenson’s study to have not evolved the ability to value social fairness over economic concerns. These studies hint that rejection of unfair offers is a cognitive and socially oriented neural process, though much research remains to verify these findings. The data trend suggests, however, that while individuals appear angry and experience negative emotions when presented with unfair offers, rejection is not solely a manifestation of negative feelings. Instead, the human ability to act against rational economic theory

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Undergraduate Research appears to be a cognitive and socially motivated process. Throughout the observed data, a consistent result is that mapping economic decision-making to finite areas of the brain with uncontested, simple functionalities is an illusory ambition. Neuroeconomics has made tremendous progress but is far from providing answers that will assign specific and socially relevant functionalities to the PFC.

References

Jensen, Keith, Josep Call, and Michael Tomasello. “Chimpanzees are Rational Maximizers in an Ultimatum Game.” Science, Vol. 318 (2007), pp. 107-110. Koenigs, Michael and Daniel Tranel. “Irrational Economic DecisionMaking After Ventromedial Prefrontal Damage: Evidence from the Ultimatum Game,” Journal of Neuroscience, Vol. 4, No.4 (2007), pp. 951-956.

Bechara, Antoine, Daniel Tranel, and Hanna Damsio. “Characterization of the Decision-Making Deficit of Patients with Ventromedial Prefrontal Cortex Lesions.” Brain, No. 123 (2000), pp. 2189-2202.

Koenigs, Michael and Daniel Tranel. “Prefrontal Cortex Damage Abolishes Brand-Cued Changes in Cola Preference.” Social Science and Cognitive Neuroscience, Sep. 2007.

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Koenigs, Michael, Liane Young, Ralph Adolphs, Daniel Tranel, Fiery Cushman, Marc Hauser, and Antonio Damasio. “Damage to the Prefrontal Cortex Increases Utilitarian Moral Judgments.” Nature, Vol. 446 (2007), pp. 908-911.

Damasio, Antonio R., Daniel Tranel, and Hanna Damasio. “Individuals with Sociopathic Behavior Caused by Frontal Damage Fail to Respond Autonomically to Social Stimuli.” Behavioral Brain Research, Vol. 41 (1990) pp. 81-94. Elliot, R., G. Rees, and R.J. Dolan. “Ventromedial Prefrontal Cortex Mediates Guessing.” Neuropsychologia, No. 37 (1999), pp. 403-411. Glimcher, Paul W., and Aldo Rustichini. “Neuroeconomics: The Consilience of Brain and Decision,” Science.Vol. 306 (2004), pp. 447-452. Greene, Joshua D. “Why are VMPFC Patients More Utilitarian? A Dual-Process Theory of Moral Judgment Explains.” Trends in Cognitive Sciences, Vol. 11 (2007), pp. 322-323.

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Value in Prefrontal and Cingulated cortex.” Nature Neuroscience, Vol . 11, No. 4 (2008), pp. 389-397. Sanfey, Alan G., James K. Rilling, Jessica A. Aronson, Leigh E. Nystrom, and Jonathan D. Cohen. “The Neural Basis of Economic Decision Making,” Science, Vol. 300 (2003), pp. 1755-1758. Smith Edward E., and John Jonides. “The Cognitive Neurosciences of Categorization.” From Gazzaniga, Michael S. (ed.). The New Cognitive Neurosciences, 2nd ed. MIT Press, Cambridge: 2000, pp. 10131022. Tranel, Daniel, Antoine Bechara, and Antonio R Damsio. “Decision Making and the Somatic Marker Hypothesis.” From Gazzaniga, Michael S. (ed.). The New Cognitive Neurosciences, 2nd ed. MIT Press, Cambridge: 2000, pp. 1047-1061.

Knoch, Daria, Alvaro Pascual-Leone, Kaspar Meyer, Valerie Treyer, and Ernst Fehr. “Diminishing Reciprocal Fairness by Disrupting the Right Prefrontal Cortex,” Science. Vol. 314 (2006) 829-832. Moll, Jorge and Ricardo de OlivieraSouza. “Response to Greene: Moral Sentiments and Reason: Friends or Foes?” Trends in Cognitive Sciences, Vol. 11 (2007), pp. 323-324. Nowak, Martin A., Karen M. Page, and Karl Sigmund. “Fairness vs. Reason in the Ultimatum Game,” Science. Vol. 289 (2000), pp. 17731776. Rushworth, Matthew, and Timothy Behrens. “Choice, Uncertainty and
