Neuroeconomics and neurofinance are emerging as intriguing fields of research, despite sharing ambiguity with the concepts of neuroscience. The relationship among the…
Neuroeconomics and neurofinance are emerging as intriguing fields of research, despite sharing ambiguity with the concepts of neuroscience. The relationship among the concepts of economics, finance and neuroscience is not explicitly defined in the past literature, which distorts the use of neuroeconomics and neurofinance approaches in real-world practice for financial decision-making. The purpose of this paper is to consolidate the literature in the field of neuroeconomics and neurofinance to set up the research agenda for the upcoming scholarship in the field.
The purpose of this paper is to consolidates the extant literature in the fields of neuroeconomics and neurofinance by conducting an extensive systematic literature review to investigate the current state and define the relationship between economics, finance and neuroscience.
This paper identifies and explains the explicit relationship between different sub-fields of neuroscience with neuroeconomics and neurofinance and providing instances for future research studies.
The exclusive and extensive literature survey in the form of systematic literature review is undertaken for understanding the fields of neuroeconomics and neurofinance and is the key highlight of this paper. Another, interesting fact lies with matching the literature in neuroeconomics and neurofinance with further sub-fields of neuroscience such as neurophysiology, neuroanatomy, molecular neuroscience and cognitive neuroscience.
Purpose – This chapter focuses on individual differences in anxiety, by reviewing its neurobiology, cognitive effects, with an emphasis on decision-making, and recent…
Purpose – This chapter focuses on individual differences in anxiety, by reviewing its neurobiology, cognitive effects, with an emphasis on decision-making, and recent developments in neuroeconomics.
Methodology – A review and discussion of anxiety and decision-making research.
Practical implications – This chapter argues that by making the step from emotional states to individual differences in emotion, neuroeconomics can extend its neurobiological roots and outreach its current clinical relevance.
Value of chapter – This chapter contributes to the literature on individual differences in emotion and their effects on decision-making, which is increasingly important in mainstream behavioral economics and neuroeconomics.
Neuroeconomics is the study of how the brain makes economic decisions. By its nature neuroeconomics studies the mechanisms of decision-making, assumed to be computational, in order to better understand the strategies people use and the choices that people make. The focus of this book is how neuroeconomics connects to health economics in a way that improves our understanding of health care and treatment decisions. This is natural for several reasons. First, the brain and the body are intimately connected to each other and the health of one depends on the other. Second, the health system is inherently about decisions. Decisions to stay healthy, decisions to diagnose illness, decisions to treat, decisions to invest in new treatments, decisions to insure, and decisions to pay. Finally, these decisions can be difficult, as the media's consistent attention to this area attests. In light of this, for this volume we chose to include chapters that review basic research on emotion or social preference that have direct relevance to decisions in health economics. We have also included chapters that refer more specifically to some aspect of people's health care or treatment decisions. In the following we indicate the chapters within each topic area. Although many chapters could arguably fit in multiple categories, we have listed each chapter only once and without particular order.
Purpose – The aim of the chapter is to show how two important facts of physicians’ behavior, (i) their tendency to “create” the demand for medical practices, and (ii…
Purpose – The aim of the chapter is to show how two important facts of physicians’ behavior, (i) their tendency to “create” the demand for medical practices, and (ii) their delay and reluctance in using new treatments and therapies, can be explained with the lens of the neuroeconomics research on the neural and behavioral basis of regret.
Methodology – This chapter adopts a neuroeconomics perspective on decision-making, asking how the brain represents values and generates emotional states, which consequently influence choices. In the line of recent work on emotion-based decision-making, we expect to be able to characterize the brain areas underlying the studied processes and to specify the functional relationship between rational decision-making and the emotional influences that modulate these decisional processes.
Originality – Neurobiological approaches can contribute significantly to a better understanding of the cognitive and emotional underpinnings of medical decision-making, from how physicians might evaluate and anticipate the effect of alternative therapies, to how patients might anticipate future consequences of their health choice. This can explain some features of the doctor–patient relationship which are not consistent with simple maximization models.
Findings – Our findings suggest that physicians’ behavior can be often explained by regret avoidance. Likewise, they suggest that physicians play as actual agents when they make medical decisions that will affect the future well-being of their patients.
Research limitations – We limited our analysis to the potential role of anticipated regret; therefore, this chapter neglects many important factors of the health sector.
Recent work on the theory of teams and team reasoning in game interactive settings is due principally to the late Michael Bacharach (Bacharach, 2006), who offers a…
Recent work on the theory of teams and team reasoning in game interactive settings is due principally to the late Michael Bacharach (Bacharach, 2006), who offers a conception of the individual as a team member, and also to Martin Hollis (1998) and Robert Sugden and Natalie Gold (Sugden, 2000; Gold & Sugden, 2007), and is motivated by the conflict between what ordinary experience suggests people often to do and what rationality prescribes for them, such as in prisoner's dilemma games where individuals can choose to cooperate or defect. The source of the conflict, they suggest, is an ambiguity in the syntax of standard game theory, which is taken to pose the question individuals in games ask themselves as, “what should I do?,” but which might be taken to pose the question, particularly when individuals are working together with others as, “what should we do?” When taken in the latter way, each individual chooses according to what best promotes the team's objective and then performs the role appropriate as a member of that team or group. Bacharach understood this change in focus in terms of the different possible cognitive frames that individuals use to think about the world and developed a variable frame theory for rational play in games in which the frame adopted for a decision problem determines what counts as rational play (Janssen, 2001; Casajus, 2001).In order to explain how someone acts, we have to take account of the representation or model of her situation that she is using as she thinks what to do. The model varies with the cognitive frame in which she does her thinking. Her frame stands to her thoughts as a set of axes does to a graph; it circumscribes the thoughts that are logically possible for her (not ever, but at that time). (Bacharach, 2006, p. 69)Sugden understands this framing idea in terms of the theory of focal points following Thomas Schelling's emphasis on the role of salience in coordination games (Schelling, 1960), and his theory similarly ties decision-making to the way the game is understood (Sugden, 1995). This all recalls what Tversky and Kahneman (1981, 1986) termed standard's theory's description invariance assumption, whose abandonment makes it possible to bring a variety of the insights from psychology to bear on rationality in economics.
The purpose of this paper is to describe the conversion of knowledge into value by examining the confluence of service-dominant logic (S-D logic), supply chain management…
The purpose of this paper is to describe the conversion of knowledge into value by examining the confluence of service-dominant logic (S-D logic), supply chain management (SCM), human resource management (HRM), and neuroeconomics. S-D logic suggests that knowledge is the raw material of value creation. SCM provides an organized foundation to study the conversion of raw materials into value. HRM recognizes the centrality of human decisions in the process of converting knowledge into value. Neuroscience gives insight into the efficiency and effectiveness of the human decisions processes. Global SCM provides more than markets and raw materials – global SCM provides the human resources central to value creation.
This paper combines literature review with interviews from members of supply chain teams engaged in performance-based logistics (PBL) to develop a model of the S-D logic knowledge conversion process.
The model describes individual-based decision constructs managers can expect to face as they convert knowledge, from a global supply chain team, into value. The model relates the decision maker mindset, based in neuroscience principals, to the efficiency of the knowledge conversion process. These principals are extended to suggest how managers can modulate human resource processes to improve the efficiency of economic exchange and increase supply chain resiliency.
This paper provides theoretical and practical insight into how differences in culture, neuronal predisposition, and genetics may influence managerial decisions. These findings provide a mechanism that researchers and managers may take to expand the boundaries of HRM in a global supply chain.
This work uses a foundation of SCM research to explain efficient conversion in a knowledge-based economy. This perspective demonstrates the criticality of global HRM mindsets and decision processes necessary to achieve competitive advantage in a knowledge-based economy. This provides a context for the study and improvement of neuroeconomic efficiency of firms.
This essay is a review of the recent literature on the methodology of economics, with a focus on three broad trends that have defined the core lines of research within the…
This essay is a review of the recent literature on the methodology of economics, with a focus on three broad trends that have defined the core lines of research within the discipline during the last two decades. These trends are: (a) the philosophical analysis of economic modelling and economic explanation; (b) the epistemology of causal inference, evidence diversity and evidence-based policy and (c) the investigation of the methodological underpinnings and public policy implications of behavioural economics. The final output is inevitably not exhaustive, yet it aims at offering a fair taste of some of the most representative questions in the field on which many philosophers, methodologists and social scientists have recently been placing a great deal of intellectual effort. The topics and references compiled in this review should serve at least as safe introductions to some of the central research questions in the philosophy and methodology of economics.
This study aims to review the relationship between neurological processes and financial behavior from an interdisciplinary perspective. Individual decision-making is…
This study aims to review the relationship between neurological processes and financial behavior from an interdisciplinary perspective. Individual decision-making is influenced by cognitive and affective biases; hence, it becomes pertinent to understand the origin of these biases. Neurofinance is an emerging field of finance budding from neuroeconomics and explains the relationship between human brain activity and financial behavior, drawn from interdisciplinary fields, including neurology, psychology and finance.
This conceptual paper extensively reviews the extant literature and performs meta-analysis to attain its research objectives.
The paper highlights the use of neuroimaging techniques in mapping the brain areas to help understand the processes in the higher cognitive areas of brain. The paper raises some new questions regarding individual preferences and choices while making financial or non-financial decisions.
The special focus on dysfunctions arising in brain because of injury and their impact on decision-making is also a key point in this paper and is summarized using meta-analytic forest plot. The existing literature provides instances where emotional processing is altered by injury in brain and may lead to more advantageous decisions, especially in risky situations.
Purpose – Acknowledging that the field of neuroscience is expanding rapidly and the implication of recent neuroscientific advances on the study of…
Purpose – Acknowledging that the field of neuroscience is expanding rapidly and the implication of recent neuroscientific advances on the study of politics is equally vast, this chapter will focus primarily on three key areas of convergence that have influenced the direction of neuropolitics: first, decision-making (emotions, preferences, and voting behavior); second, research on in-group/out-group relations, such as coalitional groupings and discrimination and prejudice; and, third, the rise of neuroeconomics.
Approach – This chapter is concerned with the intersection of political science and neuroscience and discusses how recent technological and theoretical developments in the latter are greatly contributing to the field of neuropolitics.
Findings – The insights generated by neuroscience permit the study of politics to be anchored on a scientific foundation for the first time. In turn, this opens the door to a renaissance in the political psychology subfield of political science, as the scientific origins of political behavior are revealed.
Research implications – The ongoing revolution in neuroscience is producing insights into international political behavior that is largely unacknowledged by political scientists.
Value – The implications for domestic and international policy are major. Fundamentally, this is because neuroscience allows us to comprehend better the origins of human political behavior.
Purpose – Long-term care (LTC) services assist people with limitations in the ability to perform activities of daily living (ADLs) as a result of chronic illness or…
Purpose – Long-term care (LTC) services assist people with limitations in the ability to perform activities of daily living (ADLs) as a result of chronic illness or disabilities. We discuss possible behavioral explanations for the under-purchasing of LTC insurance, as well as the current state of knowledge on the neural mechanisms behind these behavioral factors.
Findings/approach – Ideas from behavioral economics are discussed, including risk-seeking over losses, ambiguity-preferring over losses, hyperbolic discounting, and the effect of the aging process on the underlying neural mechanisms supporting these decisions. We further emphasize the role of age, as aging is a highly heterogeneous process. It is associated with changes in both brain tissue as well as cognitive abilities, and both are characterized by large individual differences. Therefore, understanding the neural mechanisms is vital to understanding this heterogeneity and identifying possible methods of interventions.
Research implications – LTC financing and insurance is a looming issue in the next 10–20 years. It is important to understand the process by which people make decisions about LTC insurance, heterogeneity in decision processes across individuals, and how these decisions interact with changes in policy and private LTC insurance markets.
Originality/value of the chapter – By providing an overview of the current state of knowledge in behavioral economics of LTC insurance and the neuroscience of aging, this chapter provides some new directions in the emerging area of neuroeconomics of aging.