Economics, psychology, and neuroscience are converging today into a unified discipline of Neuroeconomics with the ultimate aim of creating a single, general theory of human decision-making. Neuroeconomics provides biologists, economists, psychologists and social scientists with a deeper understanding of how they make their own decisions and how others decide. Neuroscience, when allied with psychology and economics, creates powerful new models to explain why we make decisions. Neurobiological mechanisms of decision-making, decisions under risk, trust and cooperation will be central issues in this course. You will be provided with the most recent evidence from brain-imaging techniques (fMRI, TMS, etc.) and introduced to the explanatory models behind them. The course does not require any prior study of economics and neuroscience; however, it might require you to study novel interdisciplinary materials. The course provides an introduction to the methodology, assumptions, and main findings of Neuroeconomics. Our students have different backgrounds; therefore, I have adapted and simplified the course to allow all students to understand the interdisciplinary content. This course will help you to start your progress in the field of Neuroeconomics and to further develop your skills during other more advanced courses and trainings in the future. For some topics, the course will also provide supplementary videos to reveal the opinions of leading experts in the field. Each module provides optional reading material. The course structure is as follows: During each video, you will have to answer some relevant questions. Your answers will not affect your final grade. At the end of each module, you must complete a quiz consisting of 15 questions. To pass the course, you must reach a satisfactory standard in all the course modules by completing all graded quizzes and the final exam. In addition to watching video lectures and taking quizzes, you will receive an invitation to join our forum. We plan to join the discussions in the forum on a weekly basis. Welcome to Neuroeconomics World!
Game Theory as a Tool to Study Decisions in Groups
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From the course by National Research University Higher School of Economics
Introduction to Neuroeconomics: How the Brain Makes Decisions
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National Research University Higher School of Economics
911 ratings
From the lesson
The Social Brain: Games in the Brain
Ancient Greek philosophers observed that we are fundamentally a social species. Indeed, the human brain has evolved to deal with complex social interactions. Day by day, we collectively analyze problems or situations and evaluate alternative courses of action within social groups. Game theory has proven useful in the investigation of the neural basis of social interactions and social decision-making. In particular, researchers have investigated what happens in the brains of subjects involved in games where each player can choose between cooperative and non-cooperative behaviors or between altruistic and selfish behaviors. Here we will apply game theory to studying the neural mechanism of decisions to cooperate or to defect. I will also introduce the mirror neurons mechanism of social interaction.
Meet the Instructors
Vasily KlucharevProfessor and Head of the Department of Psychology
Faculty of Social Sciences
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So today we will discuss your economics mechanisms sp far with decisions in
various social context.
We are social animals, and normally we make decisions in groups.
So for example, our economy is a form of competitive or cooperative behavior.
So today we'll try to understand,
how do we take into account decisions of others while making own decisions?
So, during this course, we discussed the decision-making mechanisms at
various levels of complexity.
So, we first discussed the role of neurons,
of single neuron in decision-making process.
We discussed the activity of neurons in the area LAP, for example.
So next, we discuss the role of different brain areas, for
example, the functionality of the nucleus contents of the ventral striatum or
the role of the orbitofrontal cortex and amygdala in decision-making.
So next, we moved further up in the levels of
complexity of the mechanism of decision-making.
And we discussed the role of emotions and
our cognitive functions in the decision-making process.
So today, we'll make a step further, and
we will discuss the decision making in various social context.
So, as social animals, we do normally make decisions in groups and
today we will try to use a neuro-economics approach to
understand the neuro-biological mechanism of decision-making in groups.
So, in order to start our discussion, I would first make one step further and
I would discuss their role of evolution in our cooperative and competitive behavior.
So according to the modern version of natural selection theory, multilevel
selection theory, we are affected by different evolutionary factors.
So first of all, our genes, our different version of genes, compete with,
with each other.
And also our genomes, our chromosomes, the sets of genes,
compete with each other at the level of individuals within the group.
So, the modern version of the natural selection theory,
multi-level selection theory, suggests that we,
actually, are affected by different evolutionary factors.
So, first of all, our genes or different versions of
the same genes compete with each other at the level of the single individual.
So, individuals compete with each other and natural selection here,
promotes competitive behavior, competitive behavioral pattern.
But at the same time, we have the members of the social groups and
different groups compete with each other.
So, you do the selection between groups within the population.
Natural selection can promote within group cooperation.
So at the same time, we are affected by two important evolutionary factors.
So first of all, natural selection promotes
a competition between single individuals, or the group selection
promotes a cooperation within the group and competition between groups.
So, we can summarize this idea in, using the multilevel selection theory.
So selection between individuals within groups favors cheating
non-cooperative behavior.
While selection between groups within the total population promotes cooperation
within the group to increase the relative fitness of the group as a whole group.
so it looks like we are very well suited for cooperation, so
modern theory suggests that at the group level cooperation is advantageous.
So when we compete with other groups, it makes sense to
cooperate within the group because it brings us additional benefits.
So in our society it is quite easy to protect the group of altruists,
the group of cooperators from free riders.
So we can actually punish non-cooperators.
And the price for the punishment is relatively low nowadays.
We can use weapons to punish non-cooperative people.
So we can reinforce cooperation within the group quite easily.
We also have quite long childhood.
So we have long socialization.
During the childhood we can internalize social norms, social norms of cooperation.
So we are very well suited,
to internalize, group norms of cooperative behavior.
And finally, of course, we are social animals we live in groups, and
compete with other groups.
This between group competition stimulates within-group cooperation.
So it is really important to understand the relatively simple idea suggesting that
our nervous system is adapted to our social life.
So basically the same way as we adapted to the environment.
So many studies show that there is a correlation between the complexity of
the social life and the complexity of the brain.
So, many studies show that the relative volume of the neocortex correlates with
the social group size.
It also correlates with their social skills used in mating behavior.
It also correlates with the frequency of deception and
with the frequency of social play.
So it looks like the complexity of our brain correlates with
the complexity of our social behavior.
So perhaps our brain is adapted to the complex social environment.
In the same way as it is adopted for the physical environment.
So, here you see a correlation between there neocortex ratio.
The complexity of the brain and the mean groups sizes.
And, this picture is plotted for our relative for monkeys and
apes and you see a strong correlation between the mean group size, and
the complexity of the brain.
So, our brains are designed by evolution to cope with very complex social tasks.
So we adapted to a/ very complex social environment.
And the more complex the social environment is,
the more complex brains we need.
And this is a simple idea, but
it is important to understand that our brains are adapted to the social
environment in the same way as they are adapted to the initial environment.
So indeed, our brains are adapted for
the environment, for the particular environment of our planet.
So, here you see two copies of the same image.
And the upper version of this image is clearly
perceived as a depression of the surface, as a kind of welling.
As the lower version of the same image,
that these were dated is clearly perceived as a hill, as an elevation of the surface.
So why does our brain perceive so differently as the same image?
Simply because perhaps it assumes that in our planet,
in our environment, light comes from above.
So, based on this assumption, brain interprets very differently the same
image, because it focuses on the distribution of the light, and
shadows, assuming that light comes from above.
But in the same way, our brain is adapted to the social environment, so
we are very sensitive to particular social queues.
So, for example here, I show you a mask.
But pay attention that when, this mask will be rotated and
you will see the inside surface of the mask,
your brain will automatically reconstruct the normal shape of the face.
You would not see the inverted face.
You will see a normal face that pops out of the surface.
So your brain automatically reconstruct a normal shape of the face.
Why?
Because for millions of years, we were surrounded by normal face we are not
surrounded by inverted face and our brain automatically interprets the inside
surface of the mask as a normal face and reconstruct.
So this is a very strong illusion and it shows that we are particularly
sensitive to some social cues and the face is very important social cues.
The face contains a lot of important social information and
our brain is very biased toward faces.
So we can illustrate this sensitivity to faces by another example.
So here you see my face, I made this photo more than ten years ago in Finland,
to illustrate the sensitivity to faces of our brain.
And now I will change few things in my face.
So do you see anything unusual on this face?
Actually what I did, I inverted the position of my eyes and of my mouth.
So I will show you this version.
So, here you see a very ugly face, but when I rotate this face,
you would not see this very ugly features.
Your brain would automatically reconstruct this face as more, or less, normal.
But in fact, this is a very ugly face that is
automatically interpreted as some say normal while it is rotated.
So, we are particularly sensitive to faces, and
our brain has a tendency to reconstruct faces to a normal shape
because we are surrounded by faces during the millions of our evolution.
And faces are very important social cues.
So I used a photo of my face to illustrate this tendency,
because I wanted to exchange the classical photos used in the previous studies.
In the previous studies, the photos of Margaret Thatcher were used,
but now the students do not know Margaret Thatcher.
That why I try to illustrate this effect using my face.
So to finish this story about our sensitivity to faces,
I would also mention the very interesting disorder, prosopagnosia.
This is so called face blindness.
So some patients are not able to recognize faces.
So the recent studies show that there is a genetical background for this disorder,
and approximately 2.5% of the population inherit this disorder.
This is a very interesting disorder when people are not able to see or
recognize faces and sometimes all the faces.
So they normally recognize objects but
they are face blind, they do not recognize faces.
So if you would be interested in this disorder, I recommend you to browse some
diaries or web pages of prosopagnosic patients, so you will see how these
patients try to explain their recognition of the relatives of their friends.
And, it's quite difficult to understand this case when
people are not able to see faces and only faces.
But, to come back to our main story.
I have to say that our brain is particularly sensitive to
the social information, we're sensitive to emotional expressions, for example,
among different cultures, people easily understand basic emotional expressions.
We can understand the emotional expressions of the members of
other cultures, of other races.
But we also, perhaps, are sensitive to more complex cues.
Some ethologists suggest that we automatically react to
the perceived size of other people.
So perhaps you noticed that the size of
the person quite often indicates the social status of the person.
So, and some ethologists believe that perhaps we inherit this
ability to react to the perceived size of other people.
So the size of the bodies, not only important for
politicians, but also, for example, for car manufacturers.
So, very different versions of the car,
different brands, they actually emphasize your status.
So, the larger car you have, so is the larger perceived status of the person.
So it looks like we are sensitive to the particular social information.
So our brain is predesigned by natural selection to be
very effective in decoding of the social information.
But let's now try to understand how how do we make decisions in this social context.
So you'll remember that for individual decisions, we use the decision matrices.
So here, we see an example of a very simple decision.
Whether to take an umbrella or not to take an umbrella, depending on the weather.
[COUGH] So if it rains, perhaps it makes sense to take an umbrella.
If it doesn't rain, it, perhaps doesn't make a sense to take an umbrella.
So here we see the matrix that contains different decisions and
different states of nature.
And we'll also see here the expected outcomes.
So, our utility assigned to different outcomes.
So how to study decisions in the social context.
So perhaps we can simply exchange the states of nature by social agents.
So instead of rain, we can consider here a small boy who lives nearby,
who can actually shoot a watergun machine.
And this boy will be very happy to see us wet.
So we can actually have the same decision matrix.
We decide was it to take, take an umbrella.
But we have to add here decisions of the second player.
And, perhaps we can add to our matrix,
also their utility of the outcomes for the second player.
And here we actually have an example of the game played by two players.
And we can use game theory to understand,
how should these two players behave in such a situation.
So I suggest that we will use game theory to investigate decisions in
the social context.
It provides us a formal approach to explain optimal decisions.
So actually game theory would help us to
understand how decision-makers interact with each other.
So here agin is a competitive activity where
players compete with each other according to the set of rules.
So the standard game has two components.
The set of actions and payoff function.
So we can for example cooperate or defect and
we also can assign certain utility to different outcomes.
So utility here represents decision makers preferences for different outcomes.
So to analyze behavior of two players during the game,
we can use the rule of maximization.
So we basically assume that each player would select the alternative with
the highest utility.
So today we will use strategic games to model decisions of
people in different social content.
So, strategic games should contain a set of players.
Each player would have a set of actions, and
each player would have clear preferences for different outcomes.
So can we explain the real life decisions using the game theory and strategic games?
Can we, for example, explain what should be the optimal decision of
the president of the United States.
The president of the country that, for example, already has the nuclear bomb.
But, president gets an information that another country, for
example, Soviet Union, soon will also get a nuclear bomb.
What should the president of United States do.
Should he preemptively attack, Soviet Union,
or he has to wait and try to find a cooperative solution.
So after the break we will see that the game theory suggests announcer
this dilemma and we will see how effective is this suggestion
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