infonet-economy

Affirmative action is often criticized for causing reverse discrimination and lowering thequalifications of those hired under the policy. However the magnitude of such adverse effectsdepends on whether the best suited candidate is hired absent the policy. Indeed affirmative actionmay compensate for the distortion discrimination imposes on the selection of candidates. Thispaper asks whether affirmative action can have a similar corrective impact when qualifiedindividuals fail to apply for a job. We evaluate the effect of introducing a gender quota in anenvironment where high performing women fail to enter competitions they can win. We showthat guaranteeing women equal representation among winners increases their entry. The responseexceeds that predicted by the change in probability of winning, and is in part driven by womenbeing more willing to compete against other women. The consequences are substantial as theboost in supply essentially eliminates the anticipated costs of the policy.

As the recipients of the 2012 science Nobel prizes gather in Stockholm to celebrate and be celebrated, News & Views shares some expert opinions on the achievements honoured.

Background

Decisions under risk and with outcomes that are delayed in time are ubiquitous in real life and can have a significant impact on the health and wealth of the decision-maker. Despite its potential relevance for real-world choices, the degree of aberrant risky and intertemporal decision-making in patients suffering from major depressive disorder (MDD) and posttraumatic stress disorder (PTSD) has received little attention to date.

Method

We used a case-control design to compare decision-making in healthy control subjects (N=16) versus untreated depressed subjects in a current major depressive episode (N=20). In order to examine how major depressive disorder (MDD) may impact decision-making, subjects made decisions over (1) risky outcomes and (2) delayed outcomes in the domain of gains and losses using choice paradigms from neuroeconomics. In a pre-planned analysis, depressed subjects were subdivided into those with primary PTSD along with comorbid MDD (MDD+PTSD) versus those with primary MDD without PTSD (MDD-only). Choice behavior was modeled via a standard econometric model of intertemporal choice, a quasi-hyperbolic temporal discounting function, which was estimated for each subject group separately.

Results

Under conditions of potential gain, depressed subjects demonstrated greater discounting for gains across all time frames compared to controls. In the realm of losses, both subgroups of depressed subjects discounted more steeply than controls for short time frames. However, for delayed losses ranging from >1-10 years, MDD+PTSD subjects showed shallower discounting rates relative to MDD-only subjects, who continued to discount future losses steeply. Risk attitudes did not contribute to differences in intertemporal choice.

Conclusions

Depressed patients make choices that minimize current pain and maximize current reward, despite severe later consequences or lost opportunities. Anxiety associated with PTSD may serve as a partially protective factor in decision-making about long-term potential losses compared to MDD patients without PTSD.

Using a simple but general two-­‐‑stage framework, this paper identifies the circumstances under
which increasing competition leads to more cost-­‐‑reducing investments. The framework can, for
instance, capture increasing substitutability for different types of oligopoly models or changes from Cournot to Bertrand competition. The paper identifies four transmission mechanisms by which competition affects investment. For a firm with lower initial marginal costs (higher efficiency), a positive effect of competition on investment is more likely. Positive spillovers support
a negative effect of competition on investment. The relation between competition and investment is
not affected in an unambiguous way by the level of pre-­‐‑existing competition.

Primate electrophysiological and lesion studies indicate a prominent role of the left dorsal premotor cortex (PMd) in action selection based on learned sensorimotor associations. Here we applied transcranial magnetic stimulation (TMS) to human left PMd at low or high intensity while right-handed individuals performed externally paced sequential key presses with their left hand. Movements were cued by abstract visual stimuli, and subjects either freely selected a key press or responded according to a prelearned visuomotor mapping rule. Continuous arterial spin labeling was interleaved with TMS to directly assess how stimulation of left PMd modulates task-related brain activity depending on the mode of movement selection. Relative to passive viewing, both tasks activated a frontoparietal motor network. Compared with low-intensity TMS, high-intensity TMS of left PMd was associated with an increase in activity in medial and right premotor areas without affecting task performance. Critically, this increase in task-related activity was only present when movement selection relied on arbitrary visuomotor associations but not during freely selected movements. Psychophysiological interaction analysis revealed a context-specific increase in functional coupling between the stimulated left PMd and remote right-hemispheric and mesial motor regions that was only present during arbitrary visuomotor mapping. Our TMS perturbation approach yielded causal evidence that the left PMd is implicated in mapping external cues onto the appropriate movement in humans. Furthermore, the data suggest that the left PMd may transiently form a functional network together with right-hemispheric and mesial motor regions to sustain visuomotor mapping performed with the left nondominant hand.

Decision-making research has thoroughly investigated how people choose from a set of externally provided options. However, in ill-structured real-world environments, possible options for action are not defined by the situation but have to be generated by the agent. Here, we apply behavioral analysis (Study 1) and functional magnetic resonance imaging (Study 2) to investigate option generation and subsequent choice. For this purpose, we employ a new experimental task that requires participants to generate options for simple real-world scenarios and to subsequently decide among the generated options. Correlational analysis with a cognitive test battery suggests that retrieval of options from long-term memory is a relevant process during option generation. The results of the fMRI study demonstrate that option generation in simple real-world scenarios recruits the anterior prefrontal cortex. Furthermore, we show that choice behavior and its neural correlates differ between self-generated and externally provided options. Specifically, choice between self-generated options is associated with stronger recruitment of the dorsal anterior cingulate cortex. This impact of option generation on subsequent choice underlines the need for an expanded model of decision making to accommodate choice between self-generated options.

Humans can resist temptations by exerting willpower, the effortful inhibition of impulses. But willpower can be disrupted by emotions and depleted over time. Luckily, humans can deploy alternative self-control strategies like precommitment, the voluntary restriction of access to temptations. Here, we examined the neural mechanisms of willpower and precommitment using fMRI. Behaviorally, precommitment facilitated choices for large delayed rewards, relative to willpower, especially in more impulsive individuals. While willpower was associated with activation in dorsolateral prefrontal cortex (DLPFC), posterior parietal cortex (PPC), and inferior frontal gyrus, precommitment engaged lateral frontopolar cortex (LFPC). During precommitment, LFPC showed increased functional connectivity with DLPFC and PPC, especially in more impulsive individuals, and the relationship between impulsivity and LFPC connectivity was mediated by value-related activation in ventromedial PFC. Our findings support a hierarchical model of self-control in which LFPC orchestrates precommitment by controlling action plans in more caudal prefrontal regions as a function of expected value.

Risk is an important factor impacting financial decisions. Risk can be processed objectively, e.g. as variance across possible outcomes of a choice option or subjectively, e.g. as value of that variance to a given individual. The aim of the present study was to test the potential of functional near-infrared spectroscopy (fNIRS) in assessing these different ways of processing risk while subjects decided between either high or low risk financial options or a safe (risk-free) option. For comparison we simultaneously measured electrodermal activity (EDA), a well-established method in decision-making research and a core measure of affective processes. FNIRS showed that lateral prefrontal cortex responses to high risk were enhanced relative to low risk only in risk-seeking individuals but reduced relative to low risk in risk-averse individuals. This is in-line with individual-specific risk processing reflecting the subjective value of risk. By contrast, EDA showed enhanced responses to high risk, independent of individual risk attitude, in-line with the notion of objective risk processing. The dissociation between the two measures arose even though they overall were equally sensitive to detect individual risk-related differences and even though there was an increased, risk attitude-independent, temporal coherence between the two measures during high-risk conditions. Our results suggest that hemodynamic responses in lateral prefrontal cortex as measured by fNIRS reflect the subjective value of risk, whereas EDA may index the objective amount of risk people are presented with. The findings suggest that fNIRS could be a useful method for studying risk behavior in financial decisions.