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  • Table 1. Activation Foci for Neutral Ads RegionZ ScoreTalairach Coordinates Left Cerebrum, Frontal Lobe, Sub-Gyral3.55-22, -22, 34Right Cerebrum, Frontal Lobe, Sub-Gyral3.4524, -12, 32Left Cerebrum, Frontal Lobe, Inferior Frontal Gyrus, Brodmann area 453.44-46, 20, 12Cerebrum, Frontal Lobe, Inferior Frontal Gyrus, Brodmann area 473.14-40, 24, 2Left Cerebrum, Occipital Lobe, Lingual Gyrus3.32-18, -42, -2Left Cerebrum, Limbic Lobe, Parahippocampal Gyrus, Brodmann area 353.22-18, -34, -8Left Cerebrum, Limbic Lobe, Parahippocampal Gyrus,3.08-32, -50, -6Right Cerebrum, Sub-lobar, Caudate, Caudate Body3.2914, 2, 20Right Cerebrum, Sub-lobar, Extra-Nuclear, Corpus Callosum3.276, 24, 10Right Cerebrum, Parietal Lobe, Postcentral Gyrus, Brodmann area 433.2662, -8, 14Right Cerebrum, Parietal Lobe, Precuneus2.7626, -62, 38Left Cerebrum, Limbic Lobe, Anterior Cingulate3.12-8, 32, 20Left Cerebrum, Parietal Lobe, Precuneus3.00-12, -56, 50

Overview of Neuroeconomics Overview of Neuroeconomics Presentation Transcript

  • An Overview of Neuroeconomics Dante Pirouz Doctoral Candidate Researcher Paul Merage School of Business February 7, 2008 Trial 1 T 0 0.5 1 1.5 2 2.5 3 3.5
  • Some Neuroecon Humor…
    • Consumer Behavior:
    • Brand identification
    • Brand recognition
    • Emotional response
    • Memory
  • What is Neuroeconomics?
    • Studies how the brain interacts with the environment to produce economic or consumer behavior
    • Integrates marketing, economics, psychology, neuroscience, and cognitive science
      • Influence of advertising and brands
      • Decision making
      • Influence of emotion, biases, etc.
      • Influence of other people
      • Segments – elderly, children, males, females, etc.
      • Addictive consumption
  • Cognitive Neuroscience
    • Seeks to understand the neural mechanisms underlying higher brain function
        • Language, learning, memory, attention, emotion, decision making, perception
  • Why Combine Consumer Behavior and Neuroscience?
    • Neoclassical economists ask “Given rational people, how do models behave?”
    • Psychologists ask “Why do people behave the way they do?”
    • Looking into the “black box”
      • At the neuronal and biochemical level
      • To understand what makes people happy, risk seeking or averse, trusting or trustworthy and what drives preference and choice
  • Neural Response to Advertising
    • Taste test
      • Coke vs. Pepsi
      • Baylor College of Medicine 2004
    • Super Bowl ads
      • Ranking by fMRI brain scans
      • UCLA 2006
      • Winner: ‘I’m Going to Disney World’
      • Loser: Budweiser’s ‘Secret Fridge’
  • Main Brain Regions Occipital Lobe Frontal Lobe Parietal Lobe Temporal Lobe
  • Pons Spinal Cord Cerebellum Amygdala Thalamus Hypothalamus Hippocampal Formation Corpus Callosum Cingulate Gyrus Striatum Limbic System
  • Neuroscience Methods
      • Studying humans
        • Imaging of brain activity
        • Measuring hormone levels, pupil dilation, galvanic skin response, heart rate variability
        • Lesion studies
        • Stimulation
          • Transcranial magnetic stimulation (TMS)
      • Studying animals
        • Single and multiunit recordings
  • Phineas Gage
  • Brain Imaging Techniques Methodology What is imaged? How? Electroencephalography (EEG) Changes in electrical brain current Electrodes placed on scalp measure electrical brain waves Computed (Axial) Tomography Scan (CT or CAT) X-ray images of the brain Multiple images (tomograms) are taken by rotating X-ray tubes. Does not image function Positron Emission Tomography (PET) Emissions from radioactive chemicals in the blood Radioactive isotopes injected into the blood are detected like X-rays Magnetoencephalography (MEG) Changes in electrical brain current Similar to EEG but magnetic brain waves are measured instead of electrical waves Functional Magnetic Resonance Imaging (fMRI) Blood flow; oxyhemoglobin to deoxyhemoglobin ratio Relies on magnetic properties of blood. Shows brain function spatially and temporally
  • EEG
  • CT/CAT
  • PET
  • MEG
  • Functional Magnetic Resonance Imaging (fMRI)
    • Uses strong magnetic fields to create images of biological tissue
      • Measures hemodynamic signals related to neural activity
        • Blood Oxygenation Level Dependent (BOLD) contrast
        • MR signal of blood is dependent on level of oxygenation
        • Changes in deoxyhemoglobin
    • Blood flow in the brain implies function
      • Studies have shown regional brain activity when exposed to cues (Huettel et al. 2004)
    Source: UC Irvine Center for Functional Onco-Imaging
  • Why is fMRI so exciting?
    • Non-invasive
    • Better temporal resolution
    • Good and improving spatial resolution
    • Can be used in conjunction with other methods (Savoy 2005)
    Pirouz & Park, 2005, Harvard Medical School/Massachusetts General Hospital Fellowship Program in fMRI
  • Caveats of fMRI
    • Interpreting the results
      • Direct vs. indirect measure of brain activity
      • Inferring behavior
    • Experimental design
    • Statistical methods
      • Learning the procedure and statistical methods
    • Cost
    • Comfort/safety/cooperation of the subject
  • The Dark Side of Product Attachment: The Neural Response to Addictive Product Cues Dante Pirouz, Doctoral Student Dr. Steve Cramer, Assistant Professor, Neuroanatomy/Neuroscience Connie Pechmann, Professor, Marketing Paul Rodriguez, Research Specialist, Cognitive Science University of California, Irvine Funded by a clinical research grant from UCI’s General Clinical Research Center (GCRC)
  • Background
    • Cue Reactivity Theory (Carter & Tiffany 1999)
      • Substance users exposed to environmental cues (visual, tactile, olfactory, etc.)
      • Role of cues in addiction
    • How this is related to marketing:
      • Role marketing/ advertising plays in influencing behavior
      • Especially for vulnerable populations, e.g. adolescents
  • Method
    • Event-Related fMRI (3T)
      • 6 subjects
      • 14 – 25 years old
      • 2 groups: smokers and non-smokers
    • Stimuli
      • Cigarette ads
      • Non-cigarette ads
        • Matched to cig ads
      • Neutral images
  • Cigarette Ads
    • Ads from 1998 - 2000
    • 40 images
      • Marlboro, Newport, Camel, Winston, Salem, Virginia Slims, Lucky Strike
    Source: Pollay Tobacco Ad Collection
  • Neutral Ads
    • Ads from 1999 - 2005
    • Matched in color, theme, etc.
    • 40 images
  • Neutral Images
    • International Affective Picture System (Lang 1997)
    • 40 images
  • Neural Predictors of Purchases
    • Knutson, Rick, Wimmer, Prelec and Loewenstein, Neuron, 2007
      • Investigates how people process preference and price when buying
      • Decision to purchase
        • Tradeoff between pleasure of acquisition and pain of paying
        • Positive and negative anticipatory affect
      • Determine the distinct neural components of the purchase decision process in individuals
  • Experimental Design
    • Event-related fMRI
    • SHOP = Save Holdings Or Purchase task
      • 26 adults
    • Endowed $20 to spend on range of products
      • 80 products; $8-$80
      • Subjects purchased about 30% of products
  • Results
    • Nucleus accumbens (NAcc)
      • Anticipation of financial gains
      • Correlated with product preference
      • Evaluating rewards and craving
    • Insula
      • Implicated in anticipation of loss (Paulus & Stein 2006)
      • Correlated with excessive prices
    • Mesial prefrontal cortex (MPFC)
      • Implicated with integrating gains and losses
      • Correlated with reduced prices
  • Results
    • Study shows some evidence of regions that can predict purchasing
      • Preference elicits activation in NAcc prior to purchase decision
      • Excessive prices elicits insula activation and MPFC deactivation
        • Preference as potential gain and price as potential cost
  • Investment Behavior and the Negative Side of Emotion
    • Shiv, Loewenstein, Bechara, Damasio, and Damasio, Psychological Science, 2005
      • Do emotions cause poor investment decisions?
        • Compared subjects with stable focal brain lesions disabling emotional regions with control patients with no impairment
        • 19 normal subjects, 15 lesion patients with damage in emotional regions, 7 lesion controls with damage in non-emotion related regions
  • Investment Game
    • Participants told they would making several rounds of investment decisions
      • Endowed with $20 play money
      • Choose between 2 options: invest or don’t invest
        • If invest, give $1 to researcher; if not, keep $1
      • Researcher will flip coin
        • If heads, then lose $1
        • If tails, then get $2.50
        • Rational choice: Always invest!!
          • EV of investing is higher than not investing
  • Results
    • Lesion patients with emotional neural damage make more advantageous investment decisions than normal subjects
      • Target patients invested consistently across rounds; controls/normal subjects increasingly declined to invest
  • The Neurobiology of Trust
    • Zak, Kurzban & Matzner, Annals of New York Academy of Science, 2004
      • Do hormones, such as oxytocin, regulate trust behavior?
        • Oxytocin
          • Neuropeptide involved in social recognition and bonding
        • Trust game
          • Subjects arranged into DM1-DM2 dyads
          • DM1 asked to split $10
          • Decision will determine how much they earn
        • 28 mL of blood drawn after each decision
        • 2 conditions: Intention and random draw
  • Trust Game
    • At node A, the investor has the option of either path
    • Moving left ends the game with the outcomes: $0 to the Trustee and $10 to the Investor
    • Moving right allows trustee to move (after investment is increased)
    • Trustee can choose either path at node B
    • Once trustee moves the game ends and payoffs are distributed (McCabe 2003a)
    A: Investor B: Trustee $0 $10 $15 $15 $0 $30
  • Results
    • Oxytocin (OT) levels were higher (2x) with an intentional trust signal from DM1s in DM2s than in random draw condition
    • Also, behavior changed with an intentional trust signal
      • DM2s returned 53% of the money they received vs. 18% in the random draw condition
  • $20/bottle $90/bottle
  • Marketing Actions Can Modulate Neural Representations of Experienced Pleasantness
    • Plassman, O’Doherty, Shiv and Rangel, PNAC, 2008
      • Do the changes in the price of a product affect neural representations of experienced pleasantness = price/quality effect
      • Subjects were scanned while taste testing red wines that they believed were different and sold at different prices
  • Results
    • Increasing the price of a wine increased subjective reports of flavor pleasantness
    • Increased BOLD activity in the medial orbitofrontal cortex, believed to encode for experienced pleasantness
    • Study shows that marketing actions modulate neural correlates of experienced pleasantness
  • Criticisms
    • Theory?
    • Preference for existing models
    • Press coverage
    • Consumer concern
    • Commercial ventures
  • Recommended Reading
    • “ Neuroeconomics: How Neuroscience Can Inform Economics”
      • Colin F. Camerer, George Loewenstein, and Drazen Prelec (2005) Journal of Economic Literature 43(1): 9.
    • “ What Can Advertisers Learn from Neuroscience?”
      • Hilke Plassmann, Tim Ambler, Sven Braeutigam, and Peter Kenning (2007) International Journal of Advertising 26(2): 151-75.
    • The Secret Life of the Brain , PBS
  • Thanks! [email_address] http://www.merage.uci.edu/~dpirouz04/