Spending decisions influenced by adaptation in neural circuits
From the WashU Newsroom…
The British have a pithy way of describing people who dither over spending 20 cents more for premium ice cream but happily drop an extra $5,000 for a fancier house: penny wise and pound foolish.
Now, a new study suggests that being penny wise and pound foolish is not so much a failure of judgment as it is a function of how our brains tally the value of objects that vary widely in worth.
Researchers at Washington University School of Medicine in St. Louis have found that when monkeys are faced with a choice between two options, the firing of neurons activated in the brain adjusts to reflect the enormity of the decision. Such an approach would explain why the same person can see 20 cents as a lot one moment and $5,000 as a little the next, the researchers said.
“Everybody recognizes this behavior, because everybody does it,” said senior author Camillo Padoa-Schioppa, an associate professor of neuroscience, of economics in Arts & Sciences and of biomedical engineering in the School of Engineering & Applied Science. “This paper explains where those judgments originate. The same neural circuit underlies decisions that range from a few dollars to hundreds of thousands of dollars. We found that a system that adapts to the range of values ensures maximal payoff.”
The study is available online in Nature Communications.