When you're making a deal, what's going on in your brain? | Colin Camerer

Introduction to the Strategizing Brain

In this section, the speaker introduces the topic of the strategizing brain and explains how game theory and neuroscience can be used to understand social interactions when value is at stake.

The Combination of Game Theory and Neuroscience

• Game theory is a branch of applied mathematics used in economics, political science, and biology.

• It provides a mathematical taxonomy of social life and predicts people's actions and beliefs in situations where everyone's actions affect everyone else.

• Game theory encompasses various aspects such as competition, cooperation, bargaining, and games like hide-and-seek and poker.

Understanding Social Interactions through a Simple Game

This section introduces a simple game that serves as a model for understanding social interactions. Participants choose numbers within a specific range, aiming to be closest to two-thirds of the average number chosen.

The Simple Game

• Participants choose numbers from zero to 100.

• The average of all chosen numbers is computed.

• The person closest to two-thirds of the average wins a fixed prize.

• Optimal strategy involves choosing a number slightly below the average but not too far below it.

Two Theories on Decision-Making in the Game

This section presents two theories on how people might approach decision-making in the simple game. One theory suggests that individuals may base their choices on limited information or intuition, while another theory proposes more sophisticated thinking involving multiple steps.

Theory 1: Limited Information or Intuition

• Some individuals may believe that they have no knowledge about what others will pick, leading them to assume an average choice (e.g., 50).

• Others may choose two-thirds of this assumed average (e.g., 33).

Theory 2: Sophisticated Thinking

• More sophisticated individuals may use additional steps of thinking.

• They anticipate that others will choose a response to the assumed average (e.g., 50) and adjust their own choice accordingly (e.g., two-thirds of 33, which is 22).

Equilibrium Analysis in Game Theory

This section introduces equilibrium analysis, a popular theory in game theory. It explains how equilibrium represents a mathematical state where everyone has determined what others will do. However, it may not fully explain initial decision-making in economic games or real-world situations.

Equilibrium Analysis

• Equilibrium analysis is a concept taught in game theory courses.

• It describes a state where individuals have figured out exactly what others will do.

• Behaviorally, it may not align with people's choices when playing economic games for the first time.

• According to equilibrium analysis, everyone would play zero in the simple game.

Experimental Data on Decision-Making

This section presents experimental data from studies conducted on decision-making in the simple game. The data reveals patterns and deviations from equilibrium predictions.

Experimental Data Set

• A study involved 9,000 participants who entered contests by submitting numbers for the simple game.

• Visible spikes were observed at numbers like 33 and 22, indicating one-step and two-step thinking strategies.

• Some participants chose zero or one based on equilibrium analysis but ended up losing.

Brain Activity during Decision-Making

This section discusses a study that examined brain activity during decision-making in the simple game using fMRI scans. The results highlight specific brain regions associated with social interactions.

Brain Activity Study

• Participants played the simple game while undergoing fMRI scans.

• In some trials, they were told they were playing against another person, while in other trials, they believed they were playing against a computer.

• Brain activity was compared between playing against people and playing against a computer.

• Regions such as the medial prefrontal cortex, dorsomedial area, ventromedial prefrontal cortex, anterior cingulate, and temporoparietal junction showed increased activity during social interactions.

The transcript is already in English.

What Happens in Your Brain When You Play a Game?

In this section, the speaker discusses how different types of players are classified based on their decision-making strategies and how brain activity differs between playing against humans and computers.

Types of Players

• One-step players treat other people like computers, resulting in minimal brain activity differences compared to playing against computers.

• Two-step players show differential activity in the dorsomedial PFC, indicating a different decision-making approach.

Potential Applications

• Brain activity analysis could potentially predict someone's aptitude for poker or social naivety.

• Understanding the circuitry involved in decision-making could help study adolescent brain development.

Bargaining Game: EEG Recording

This section introduces a bargaining game where two players negotiate over a sum of money within a time limit. The informed player knows the amount available for negotiation, while the uninformed player has to assess fairness.

Bargaining Game Setup

• Two players bargain over one to six dollars within 10 seconds to earn that money. If no deal is made within the time limit, they receive nothing.

• The informed player knows the specific amount available for negotiation, while the uninformed player is unaware but knows that the informed player has knowledge about it.

• The uninformed player's challenge is to determine if they are being offered a fair share or if they should reject it based on potential hidden information about available funds.

Bargaining Dynamics

• Players use a number line from zero to six dollars to indicate how much the uninformed player should receive, with the informed player getting the rest. It resembles management-labor negotiations where workers are unaware of the company's profits.

• Face-to-face pairs often agree to divide the money evenly, while pairs playing across computers show interesting differences.

• Disagreements occur more frequently when the amount to divide is one, two, or three dollars, while agreements are more common for higher amounts. This aligns with predictions from complex game theory.

EEG Recording Results

The speaker presents EEG recording results and discusses brain activity synchronization between informed and uninformed players during the bargaining game.

Time-Synced Brain Activity

• EEG recordings of both players simultaneously reveal time-synced brain activity in similar or different areas. Arrows indicate the flow of activity from one region to another.

• In most cases, arrows flow from right to left, suggesting that uninformed brain activity precedes informed brain activity. This analysis is based on early data and may provide insights into deal-making within the first few seconds.

Potential Applications

• Understanding early brain activity patterns could be useful in predicting whether a deal will be made or not, which has implications for avoiding delays and conflicts in various scenarios such as litigation or divorces.

The transcript provided does not include timestamps beyond 539 seconds (8 minutes and 59 seconds).

Introduction to Human and Chimpanzee Relationship

In this section, the speaker introduces the relationship between humans and chimpanzees, highlighting their genetic similarities and the potential insights into brain evolution that can be gained from studying their behavioral differences.

Humans and Chimpanzees as Relatives

• Humans broke off from the family tree of chimpanzees about five million years ago.

• Humans share 98.8 percent of their genes with chimpanzees, more than zebras do with horses.

• Chimpanzees have a closer genetic relation to humans than to gorillas.

Memory Test in Chimpanzees

• A memory test conducted at the Primate Research Institute in Kyoto, Japan involved chimps using working memory.

• Chimps were shown numbers for a brief period and then had to press corresponding squares in order to receive a reward.

• Young chimps performed better than older ones due to experience and training.

Cognitive Trade-off Hypothesis

The speaker discusses Tetsuro Matsuzawa's cognitive trade-off hypothesis, which suggests that chimps prioritize brain activities related to strategic thinking during competition for status.

Chimps Playing a Game

• Chimps played a game by interacting with each other through touch screens, pressing left or right based on their roles as matchers or mismatchers.

• The game was designed to test if chimps prioritize winning or matching behavior during competition for status.

• Payoffs in terms of apple cube rewards were used to analyze chimp behavior according to game theory principles.

Chimp Behavior and Game Theory

• Chimp behavior in the game was analyzed based on the percentage of times they picked right.

• The results showed that chimps' behavior aligned with the predictions of game theory, particularly around a 50-50 match rate.

• Changes in payoffs influenced chimp behavior, indicating their sensitivity to rewards.

Comparison with Human Behavior

The speaker compares chimp behavior in the game to human behavior, highlighting differences in strategic thinking and adherence to game theory principles.

Humans vs. Chimpanzees

• Two groups of humans from Japan and Africa were compared to chimps in terms of their behavior in the game.

• Humans showed less adherence to game theory principles and were not as sensitive to previous rewards compared to chimps.

• Chimps outperformed humans in terms of strategic thinking and adherence to game theory principles.

Conclusion

The study highlights the genetic relationship between humans and chimpanzees, providing insights into brain evolution through behavioral differences. Chimpanzees demonstrate strong strategic thinking skills during competition for status, outperforming humans in adhering to game theory principles.