Effects of loss aversion on neural responses to loss outcomes: An event-related potential study

Abstract

Loss aversion is the tendency to prefer avoiding losses over acquiring gains of the same amount. To shed light on the spatio-temporal processes underlying loss aversion, we analysed the associations between individual loss aversion and electrophysiological responses to loss and gain outcomes in a monetary gamble task. Electroencephalographic feedback-related negativity (FRN) was computed in 29 healthy participants as the difference in electrical potentials between losses and gains. Loss aversion was evaluated using non-linear parametric fitting of choices in a separate gamble task. Loss aversion correlated positively with FRN amplitude (233-263ms) at electrodes covering the lower face. Feedback related potentials were modelled by five equivalent source dipoles. From these dipoles, stronger activity in a source located in the orbitofrontal cortex was associated with loss aversion. The results suggest that loss aversion implemented during risky decision making is related to a valuation process in the orbitofrontal cortex, which manifests during learning choice outcomes.

Event-Related Potentials in Relation to Risk-Taking: A Systematic Review

“…Out of the 43 studies measuring early error-detection components, 34 studies reported larger amplitudes for loss than for gain feedback (Gehring and Willoughby, 2002 ; Nieuwenhuis et al, 2004 ; Yu and Zhou, 2006 , 2009 ; Goyer et al, 2008 ; Li et al, 2009 ; Wu and Zhou, 2009 ; Gu et al, 2010 ; Leng and Zhou, 2010 , 2014 ; Marco-Pallares et al, 2010 ; Polezzi et al, 2010 ; Rigoni et al, 2010 ; Nelson et al, 2011 ; Santesso et al, 2011 ; Heitland et al, 2012 ; Ibanez et al, 2012 ; Schuermann et al, 2012 ; Zottoli and Grose-Fifer, 2012 ; Leicht et al, 2013 ; Luo and Qu, 2013 ; Zhang et al, 2013 , 2014 ; Zhu et al, 2014 , 2016a , b ; Mushtaq et al, 2015 , 2016 ; Sun et al, 2015 ; Endrass et al, 2016 ; Kardos et al, 2016 ; Kokmotou et al, 2017 ; Wang et al, 2017 ; Watts et al, 2017 ). Ma et al ( 2011 ) reported the opposite effect, showing larger early error-detection component amplitudes in response to gain feedback compared to loss feedback.…”

Effect of uncertainty‐dependent residential mobility on loss aversion

“…Moreover, we observed a significant correlation between uncertainty and differential FRN modulations for the largeamount outcomes in individuals with a residentially mobile mindset rather than a stable mindset. As differential FRN modulations in win-minus-loss outcomes are correlated with loss aversion (Kokmotou et al, 2017), our ERP results imply that the differential FRN at central electrode sites might underlie the neural mechanism underlying the role of residential mobility in loss aversion among individuals with high uncertainty. Previous fMRI studies, with high spatial resolution, have identified distinct brain regions associated with loss aversion, such as the ACC (Fukunaga et al, 2012) and ventral striatum (e.g., Canessa et al, 2017).…”

“…To further elucidate the neuropsychological process of how the interaction of residential mobility with uncertainty impacts loss aversion, we employed the technique of ERPs with high time resolutions. Previous ERP findings have suggested that FRN could signal the neural representations of loss aversion (e.g., Kokmotou et al, 2017). FRN is the negative deflections that are sensitive to gain and loss (e.g., Holroyd et al, 2008;Walsh & Anderson, 2012), which always peak at approximately 250 ms and maximally pronounced at fronto-central electrode sites (e.g., Holroyd & Coles, 2002).Thus, to induce FRN, we involved participants in a gambling task that provided feedbacks of losses and gains during EEG recordings.…”

“…Electroencephalogram (EEG) research has suggested that the asymmetry of neural responses in the alpha band at central and posterior sites could explain individual differences in loss aversion (Duke et al, 2018). Furthermore, an event-related potential (ERP) study using a gambling task has found that loss aversion was correlated with feedback-related negativity (FRN; Kokmotou et al, 2017), which is the negative deflections sensitive to gain and loss (e.g., Holroyd et al, 2008;Walsh & Anderson, 2012), peaking at approximately 250 ms and maximally pronounced at fronto-central electrode sites (e.g., Holroyd & Coles, 2002). However, limited studies have employed the ERP approach, a technique with high temporal resolution, to investigate what determines loss aversion and how that is determined.…”

Contents of product attributes and the decoy effect: A study on traceable pork from the perspective of consumer utility

“…Figure 1 explains that when a product attribute produces the same amount of gain or loss in value or utility relative to the reference point, consumers' evaluation of loss, L , is higher than that of the gain, R (Kahneman & Tversky, 1979; Kokmotou et al, 2017). The introduction of a decoy product can be viewed as providing a reference point for consumers.…”