Natural Sciences

Minds and Money : Game Theory, Decision Making and Abstract Cooperation

Editor’s Note: This is the third part of “Mind’s Matter”, a series by Dr. Jonathan Pararajasingham exploring the Neurobiological basis of behaviour.

Every individual navigates through life producing a continuous stream of choices and decisions. A variety of disciplines examining behaviour have tried to elucidate the processes involved in how we make choices, but largely without assimilating their actual data and findings. Neuroeconomics is a unique interdisciplinary field which aims to change all that, by studying decision making with the use of mind sciences including psychology and neuroscience, as well as economic theory. The Israeli economist Ariel Rubinstein describes economics itself as a culture rather than a science – a collection of accepted ideas and conventions that are used in our thinking. For this reason neuroeconomics as an actual science will probably influence economics in a similarly positive way cognitive psychology and behavioural economics have.

While the nascent field of neuroeconomics has its teething problems, it certainly has potential uses. Once we have rationally exhausted our economic models for example, it would make sense to then begin to use models based on neuroeconomics data which could indicate how common particular decision-making behaviours are, as well help identify differentiate types of individuals that share certain behaviours.

Brain Areas Activated in Decision-Making

Neuroeconomics allows investigation of complex social processes such as reputation, trust, equality, and cooperation. Research has already begun to illustrate how social exchange can act directly on the brain’s reward system, how affective factors play an important role in play bargaining, reciprocal exchange and coordination/competitive games, and how the ability to assess another’s intentions is related to strategic play.

Dopamine system: It seems that the brain uses a reward system in making its choices. The dopamine system seems to be activated proportionally with reward, scaling directly with the magnitude of monetary reward or punishment.

Basal Ganglia: A particular group of brain structures known as the basal ganglia are responsible for initiation of movement, learning, and action selection i.e. choosing which of several behaviours to execute at any given time. They do this by inhibiting multiple motor systems and permitting one particular motor system to become active. The decision-making process of the basal ganglia is influenced by higher intellectual centres in the brain such as the prefrontal cortex. The human striatum (major input station for the basal ganglia) appears to be centrally involved in social decisions, tracking a social partner’s decision to reciprocate or not reciprocate cooperation, appearing to encode abstract rewards such as the positive feeling garnered by mutual cooperation.

Striatum: Reinforcement-learning mechanisms have been found in primate studies, which improve choices over time by continually updating the encountered reward and punishment outcomes. Reciprocated cooperation with another human leads to increased activation in the striatum as compared with a control condition where an identical amount of money is earned, whereas unreciprocated cooperation shows a corresponding decrease in activation in this area. In addition, activation is associated with increased cooperation in subsequent rounds, which suggests that the striatum may register social prediction errors to guide decisions about reciprocity.

Of course, social reward need not always be related to positive, mutually cooperative, actions. Players also may derive satisfaction from punishing defectors, even when this punishment leads to a financial loss to the player. Studies show this was associated with activation in the brain’s caudate nucleus (part of the basal ganglia), with activation greater when the punishment was real (involving a financial loss to the defector) than when it was merely symbolic. In studies examining altruism and charitable donation, the striatum was engaged by both receiving money and by donations to charity. Furthermore, activity was enhanced when charitable donation was voluntary as opposed to forced.

Emotional centres: Regulation of emotions also seems to be important in social decision-making. Emotional processes seem to reliably engage the reward-processing mechanisms and higher cortex. Negative emotional states occur as a result of both inequity and nonreciprocity, including unfair offers. These emotional reactions have been proposed as a mechanism by which inequity is avoided and may have evolved precisely to foster mutual reciprocity, to make reputation important, and to encourage punishment of those seeking to take advantage of others. Indeed, even capuchin monkeys respond negatively to unequal distributions of rewards by refusing to participate in a task that requires effort if they witness another monkey receiving equal reward for less work.

Anterior Insula: Other research demonstrates that the anterior insula is activated proportionally as the unfairness/inequity of an offer increases. Brain imaging studies have previously shown the anterior insula to be related to empathy, activating when witnessing pain in others. But activation of this area has now been shown to predict a player’s decision to either accept or reject an offer, with rejections associated with significantly higher activation than acceptances. Individuals with a stronger anterior insula response to rejection also show a higher frequency of defection. The implication here is the key role of the insula in distrust in social interactions.

Prefrontal Cortex: Transcranial magnetic stimulation was used to disrupt processing in dorsolateral prefrontal cortex increases acceptance rates of unfair offers as compared with control situations, indicating the importance of the higher intellectual centres in evaluating our choices.

Oxytocin: Oxytocin is a neuropeptide known to facilitate social affiliation in nonhuman animals and to modulate human social relationships. Intranasal administration of oxytocin has been shown to increase trust in social human interactions, but not in risk-taking or in games with random outcomes.

Theory of Mind: Interpreting the meaning of behaviour from another person is part of the brain’s ability to form a theory of mind (ToM). The medial prefrontal cortex and anterior cingulate cortex are found to be active when forming a ToM, and decision-making studies have similarly demonstrated activation in these regions when players are immersed in thinking, guessing and acting on the beliefs of others (i.e. intention detection). Other areas may be involved in these ToM processes, such as the tempo-parietal junction. Autistic patients, known to have deficits in empathy and forming ToMs, have also been found to fall short in making reasoned social decisions.

Brain areas activated in decision-making:

(A) Lateral view: dorsolateral prefrontal cortex (DLPFC), superior temporal sulcus (STS).

(B) Sagittal view: anterior cingulate cortex (ACC), medial prefrontal cortex (MPFC), orbitofrontal cortex (OFC), posterior cingulate cortex (PCC).

(C) Coronal view (cut along line in A/B): insula (INS), amygdala (AMY).

Game Theory

Game theory is a branch of applied mathematics which aims to codify strategic behaviour in games/situations, where the success of a choice is affected by the choices of others. It can be seen as an extension of the use of decision trees and rational choice models which have been used in economic theory for many decades. Experimental economics utilises game theory, which proves to be a useful tool in investigating strategic interaction between decision-making players. Data so far shows a high amount of variability in how players interact, probably because of variation in how individuals assess the rationality of their opponents. The ultimate aim is to be able to use retrospective data to predict how decisions are made under controlled conditions, and then in the real world i.e. prescriptive decision theory.

Decision Theory: Prescriptive vs. Descriptive

Decision theory examines the decision-making process itself, and is therefore a field closely related to game theory. It assumes an ideal decision maker would be one that is perfectly rational, informed and accurate in their calculations.

Most of decision theory is prescriptive, attempting to identify the best decision to take. The practical application of this prescriptive approach (how people actually make decisions) is called decision analysis, and is aimed at finding tools, methodologies and software to help people make better decisions. The most systematic and comprehensive software tools developed in this way are called decision support systems.

Since people usually do not behave in ways consistent with axiomatic rules, often their own, leading to violations of optimality, there is a related area of study, called a positive or descriptive discipline, attempting to describe what people will actually do. Since the normative, optimal decision often creates hypotheses for testing against actual behaviour, the two fields are closely linked. Furthermore it is possible to relax the assumptions of perfect information, rationality and so forth in various ways, and produce a series of different prescriptions or predictions about behaviour, allowing for further tests of the kind of decision-making that occurs in practice.

Rational Basis for Cooperation

Despite huge efforts, understanding the mechanisms that create cooperating agents in a system is one of the most important and least well understood phenomena in nature.

In game theory, an important question is what do players need to know about their opponents in order to make the best and most rational strategic choices? Concepts in game theory at the moment include things like “default” reasoning (assume equal weight for the opponent’s strategies), backwards induction and forwards induction (what will an opponent do if they continue to play?). Repeated games produce interesting results, since players will have additional information about how their opponents have decided to play on previous games, and therefore their behaviour (rational or irrational) can be taken into account.

Even if all members of a group would benefit if all cooperate, individual self-interest may not favour cooperation. Economic experiments for high stakes support the claim that humans act more cooperatively than strict self-interest would dictate. A much researched experiment in economics which demonstrates this is the repeated/iterated “prisoner’s dilemma”, where non-cooperation leads to better outcomes in the short term, but to increased punishment when repeated.

Such natural developments of abstract cooperation may explain the natural selection of such behaviour in higher life forms, who will have increased chances of survival when cooperating. So while similar desires will clearly lead to cooperative behaviour, the chance of future encounters with the same individual will also lead to cooperation through the emotional mediation of trust. This makes cooperation even in the absence of an “objective” standard a rational enterprise.


Ariel Rubinstein, Comments on neuroeconomics Economics and Philosophy, 24 (2008) 485–494, Cambridge University Press

Alan G. Sanfey, Social Decision-Making: Insights from Game Theory and Neuroscience, Science 26 October 2007: Vol. 318. no. 5850, pp. 598 – 602

Daeyeol Lee, Game theory and neural basis of social decision making, Nature Neuroscience 11, 404 – 409 (2008).

About the author

Jonathan Pararajasingham

Dr Jonathan T. Pararajasingham is a British medical doctor specialising in Neurosurgery, researcher and freethought writer. His writings span a range of topics including neuroscience, philosophy, ethics and theology, and many of his articles aim to make accessible such abstract topics for the nonspecialist reader. More of his work can be found at

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