The Impact of Emotions and Individual Differences Upon Economic Decision-Making

Cogniţie, Creier, Comportament / Cognition, Brain, Behavior
Copyright © 2006 Romanian Association for Cognitive Science. All rights reserved.
ISSN: 1224-8398
Volume X, No. 3 (September), 439-459
THE IMPACT OF EMOTIONS AND INDIVIDUAL

DIFFERENCES UPON ECONOMIC DECISION-
MAKING: A REVIEW OF EXPERIMENTAL
LITERATURE
Renata M. HEILMAN *
Babes-Bolyai University, Cluj-Napoca, Romania
ABSTRACT
Economists first approached decision-making processes in their efforts to
determine how to choose the most profitable alternative in an economic
setting. Recent efforts of bridging together economics and psychology
emphasized that while economics should further develop as the science of
how resources are allocated by individuals and collective organizations like
firms and markets, it is necessary that the psychology of individual behavior
underlies and informs economics, much as neuroscience has informed
cognitive psychology in the past thirty years or so. Behavioral economics, a
recently developed interdisciplinary field, can be epistemologically
distinguished from other social sciences by its emphasis on formal and
psychologically informed explanation of field data. The present review will
outline the effects of emotion and individual differences on decision-making
and it will hopefully serve as an introduction to contemporary behavioral
economics.
KEYWORDS: decision-making, behavioral economics, emotions, personality
Introduction
Economists first approached decision-making processes in their efforts to

determine how to choose the most profitable alternative in an economic setting.
Early decisional models had a normative character because they prescribed how a
decision should be made in transparent and predictable situations, rather than
having described real-life decision processes. As early as 1738, the Dutch
mathematician Daniel Bernoulli, famous nowadays not only for his theorem from
fluid dynamics, but also for his multidisciplinary interests in medicine, biology,
*
Corresponding address:
E-mail: renataheilman@gmail.com
440 R.M. Heilman / Cognition, Brain, Behavior 10 (2006) 439-459
physiology, mechanics, physics, astronomy, and oceanography 1 , put forward the

expected utility theory that showed how one could use mathematic calculus to
estimate the benefit associated with one of multiple decisional alternatives. This
and other normative models dominated theory and research in economics until the
mid 20th century, but their credibility started to decline with the increasing
realization by experimental psychologists that decisions are “the chaos of a
subjectivity that lacks objective control”, like the American philosopher John
Dewey would have put it. The main criticism, which is quoted in recent textbooks,
has indicated that these models ignored the influence of emotions on decision-
making by idealizing the decisional agent and viewing him/her as completely
rational and omniscient, aware of all possible alternatives. Despite criticisms like
this, the normative models of decision continued to appeal experimental
psychologists who originally designed studies to provide empirical support for
these models. Contrary to scientists’ expectations that reality satisfied their need
for simplicity and formal elegance, the results of these early studies did not
confirm the hypotheses drawn from the normative models. For instance, it was
found that the normative models could not accurately predict behavior in
multivariate situations involving a time-limited response (for review see Miclea,
2003, pp. 268-271).
Recent efforts of bridging together economics and psychology emphasized
that while economics should further develop as the science of how resources are
allocated by individuals and collective institutions like firms and markets, it is
necessary that the psychology of individual behavior underlies and informs
economics, much as neuroscience has informed cognitive psychology in the past
thirty years or so (Camerer, 1999). The need for multidisciplinarity conditioning
the expansion of modern economics was acknowledged by pioneers like Herbert
Simon whose influential efforts of reunifying the sciences and scientists from
psychology and economics were praised in 1978, when he was awarded the Bank
of Sweden Prize for Economic Sciences in memory of Alfred Nobel. Simon had
put forward the theory of bounded rationality, according to which the decisional
agent uses heuristics and simplified representations of alternatives due to limited
computational and time resources (for review, see Miclea, 2003, pp. 271-273).
Behavioral economics, as the approach pioneered by Simon has been recently
called, can be epistemologically distinguished from other social sciences by its
emphasis on formal and psychologically informed explanation of field data
(Dasgupta, 2003; Schwartz, 2002).
Cognitive psychologists have begun to systematically approach reasoning
and economic decision-making in the 1970s, with the seminal work of Daniel
Kahneman and Amos Tversky, two American psychologists. Following their
research with large-scale applicability, cognitive psychologists have made
1
Bernoulli, Daniel. (2006). In Encyclopædia Britannica. Retrieved September 5, 2006, from
Encyclopædia Britannica Premium Service: http://www.britannica.com/eb/article-9078863
R.M. Heilman / Cognition, Brain, Behavior 10 (2006) 439-459 441
considerable progress in understanding decision-making, and economists have

increasingly taken up the challenge of looking for some psychological plausibility
of their economic theories (for reviews see Handgraaf & Raaij, 2005; Kahneman,
2003; Smith, 2005; Zwick, Erev & Budescu, 1999). Modern multidisciplinary
decision-making studies have used economic games, which are controlled tasks
with simple behavioural solutions and ecologic validity (for review see Haselhuhn
& Mellers, 2005). One pivotal observation that has arisen from these studies
indicated the inter-individual variability of behavioral performance, which, once
the task-related variables have been controlled for, has been attributed to individual
differences. It has therefore become clear that psychological variables play an
essential role in decision-making. The present review will outline the effects of
emotion and individual differences on decision-making.
Emotions and decision-making
Emotions play a central role in our lives. They impact our beliefs, inform
our decisions and largely guide our adaptation to the physical and social milieu.
While most apparent in moments of great distress, emotions sway even the
mundane decisions we face in everyday life (for reviews see Cohen, 2005; Gratch
& Marsella, 2004; Mellers, 1998; Schulkin, Thompson & Rosen., 2003). Considering
the effects of emotions on decision-making, it has been shown that, on one hand,
positive emotions are associated with a larger number of perceived alternatives,
involving complex decisional strategies and increased deliberation time, but also
overestimating the probability of positive consequences and underestimating the
likelihood of negative consequences (for review see Paulus, 2005). On the other
hand, negative emotions impede the active search for alternatives and the use of
multiple information sources and they also reduce the time necessary to choose an
alternative (Paulus, 2005). Using a mood induction strategy and evaluating the
willingness to take risky decisions, Yuen and Lee (2003) showed that individuals
in induced depressed mood were significantly more conservative in taking risks
than those who were in neutral mood, while people in induced happy mood did not
differ significantly from those in neutral mood. The clinical implications of these
results are obvious when we consider the case of patients with clinical depression,
who are often recommended by their therapists not to make critical life decisions,
because these might be negatively biased by the affective state that they are in.
Decision-making tasks can be classified in two broad categories,
depending on instructions and setting. On one hand, we have cooperation games,
like the ultimatum game or prisoners dilemma. These tasks involve at least two
participants, they have a social nature, and the best outcome for everyone involved
is achieved only if participants apply and obey social norms and cooperate. On the
other hand, we have games that involve individual risk-taking, in which the net
gain of a participant entirely depends on his/her decisions (e.g., the Iowa gambling
task).
Box 1 – The Iowa Gambling Task
Participants are presented with 4 decks of cards on a computer screen or on a table in front of
them. They are told that each time they choose a card they will win some game money. Every so
often, however, when they choose a card, they will win money, but they will also lose some
money too. The goal of the game is to win as much money as possible. Every card drawn will
earn the participant a reward ($100 for Decks A and B; $50 for Decks C and D). Occasionally, a
card will also have a penalty (A and B have a total penalty of $1250 for every ten cards; C and D
have a total penalty of $250 for every ten cards). Thus, A and B are "bad decks", and C and D are
"good decks", because Decks A or B will lead to losses over the long run, and Decks C or D will
lead to gains. Deck A differs from B and Deck C differs from D in the number of trials over
which the losses are distributed: A and C have five smaller loss cards for every ten cards; B and D
have one larger loss card for every ten cards. Participants have to select 100 cards, one at a time,
but they are not told when the experiment will end.
The behavioral performance in this task is evaluated through a (C+D)-(A+B) index, which means
that the total number of disadtvantageus cards is subtracted from the total number of
advantageous cards. If the coeficient is positive, then the participant had an overal good
performance.
Some major research results:
• Patients with lesions of the ventromedial prefrontal cortex tend to choose

predominantely from the bad decks, compared with normal controls, who, after an
approximate 50 cards, tend to choose mostly from the good decks (Bechara, Damasio,
Damasio & Anderson, 1994).
• Normal controls develop anticipatory skin conductance responses, while patients with
frontal lesion do not (Bechara, Tranel, Damasio & Damasio, 1996).
• Normal controls show anticipatory skin conductance responses and select cards from
good decks even before being able of explicitly saying what the good strategy is. Some
of the lesion patients realize which choices are risky, but still tend to choose cards from
bad decks (Bechara, Damasio, Tranel & Damasio, 1997).
The Iowa gambling task (IGT) (see Box 1) is a well-established measure of the role
of emotions in decision-making, and it has been used to illustrate the extent to
which learning based on emotions can be useful in dealing with situations
demanding complex problem solving (Bechara et al., 1994). The IGT was
introduced by A. Bechara, a clinical neuropsychologist who investigated the subtle
cognitive deficits of patients with lesions in the ventromedial prefrontal cortex
(VMPFC) who were obviously making ineffective life choices after their brain
injuries, but often did well on tests of executive functions (Bechara et al., 1997).
Using IGT, it has been shown that VMPFC patients systematically choose
alternatives that are advantageous on the short-term, but disadvantageous on the
long-term. Their behavioral performance was described as “myopia for the future”
because they seemed to be unaware of the future consequences of their actions and
guided by immediate rewards only. This pattern of results was also found in
patients with amygdala lesions (see Bechara et al., 1999). In order to explain the
mechanisms by which decision-making is influenced by emotions, A. Damasio
(1991) proposed the somatic marker hypothesis (SMH). According to the author,
the decision-making deficits associated with VMPFC damage are due to an
inability to use emotion-based biasing signals generated from the body or “somatic
markers” (e.g., the skin conductance response; SCR) when appraising different
response options. In situations of complexity and uncertainty, these marker signals
help to reduce the problem space to a tractable size by marking response options
with an “emotional” signal (for review see Dunn, Dalgleish, & Lawrence, 2006).
This neuropsychological theory has suggested that somatic markers inform
emotional biases and they contribute to the integration of contextual information
necessary for making an adaptive decision. Since IGT involves using context-
dependent, emotional cues in the process of decision-making, it has been widely
acknowledged as a decision-making task based on somatic marker appraisals and
emotional learning. Studies using IGT have supported the SMH and they related
emotions and decision-making to an emotional system in which the amygdala and
VMPFC were major players. Research on decision-making in neurological patients
who can no longer adaptively process emotional information have extensively lent
credit to the view that people make judgements not only by evaluating the
consequences of their decisions, but also by considering information related to
their emotional states (for review see Bechara, 2004).
Although the IGT was designed to measure decision-making deficits in
patients with brain lesions, it has also been used in studies of neurologically non-
impaired volunteers who nonetheless showed inter-individual variability, with
some 37% of them performing within the range of patients with frontal lesions
(Bechara & Damasio, 2002). This is the reason why researchers have recently
started to explore some of the individual factors that influence IGT performance in
volunteers. One surprising result found a correlation between university education
and poorer behavioral performance (N.B.: IGT usually involves a behavioral and a
psychophysiological measure, but the aforementioned effect was found only in
relation to behavior; see Box 1 and Evans, Kemish & Turnbull, 2004). The authors
stated that, if IGT performance depends on learning based on emotions, than
people with higher education would perform more poorly than those with high-
school education, mainly because university-level education is built on the
importance of validated sources of reference, systematic rational arguments, and
specific exclusion of appeals to emotion (Evans et al., 2004). There are at least two
comments that we have to consider in regard to this study. Fist of all, provided the
results are reliable, this study does not imply that higher education prevents
benefiting from emotion biases in decision-making. However, it implies that
increasing the opportunities of emotional learning in higher education would
optimize emotion-informed decision-making. This line of reasoning has
communalities with the purposes of rational-emotive behavior therapy in school
contexts and it would warrant further experimental investigations. Second of all,
the results of Evans and coworkers are not in line with a previous study by Bechara
that found no effect of education on IGT performance in healthy volunteers
(Bechara, Damasio & Damasio, 2000). In addition to being impaired in amygdala-
lesioned patients, this detrimental effect of education, which is less focused on
emotions, would come as a second line of evidence for the fact that the IGT indeed
measures the emotional based learning. Besides showing that participants with
university-level education underperform high-school education participants, the
authors also found that the university-educated group scored some 14 points higher
on a measure of intelligence (National Adult Reading Test) than their less-well-
educated peers. No matter how intriguing, the inverse relation between
intelligence, education and IGT would warrant further studies.
Another economic game that has been frequently used in studies of
emotions is the ultimatum game (UG; see Box 2), put forward by W. Guth and co-
workers (1982) to test the predictions of the normative models of decision-making.
According to the normative models, both cooperation and punishment are
economic anomalies, but modern experiments have consistently shown that these
two variables are very important for behavioral performance in the UG.
Researchers have been interested in the emotions of players during this game, and
how these emotions might be associated with the acceptance or rejection of unfair
offers. For instance, Pillutla and Murningham (1996) showed that in responders
who received an unfair offer, anger, sadness, irritation and contempt positively
correlated with rejection of the offer. More recently, Sanfey and co-workers (2003)
used functional magnetic resonance imaging (fMRI) acquired while their
participants played the UG and they showed that participants with a higher
activation in the bilateral anterior insula were more likely to reject unfair offers,
while those with greater activation in the dorsolateral prefrontal cortex were more
likely to accept unfair offers. In the standard UG, the only way for the responder to
show the proposer that his/her offer was unfair, and thus punish him/her, is to
reject the offer. But Xiao & Houser (2005) wanted to see how participants would
play the UG if the responder could express his/her feelings towards the proposer in
Box 2 – The Ultimatum Game
The game is played in pairs, one of the participants being the proposer and the other one
the responder. The proposer is given a sum of money, often $10, and is told to divide it
between him/her and the responder. The responder can either accept the offer, and the
money is divided accordingly, or rejects it, with both players receiving nothing. The
normative solution for the UG is for the proposer to offer a small amount (such as 1¢)
and for the responder to accept the amount because “something is better than nothing”.
In reality, the modal division of the money is the 50/50 and the offers that fall under
20% are usually rejected. It is therefore considered that participants are more altruistic
than the normative models would have predicted.
Player 1
$10
(Proposer)
accept reject
Player 2 X, 10-X 0, 0
( Responder)
another way. So, the authors gave the responders the instruction that they could
write a message to the proposer at no pecuniary cost. The results indicated that the
responders tended to accept more frequently the unfair offers if they could send a
disapproval message to the proposer. Basically, if they were given another channel
to communicate their negative emotions towards the proposer, besides the rejection
per se, they behaved close to what the normative models would have predicted.
These results have also generally supported the idea that emotions have a major
influence on decision-making processes.
We have already reviewed some evidence that good decision strategies
depend on the functional and anatomical integrity of neural systems underlying
emotions and decision-making in the IGT and, furthermore, they prescribe the
acceptance of even some unfair offers in the UG. It has been pointed out that
emotions have contradictory effects on the decision outcome, depending on the
task and population sample one uses. To illustrate the latter point, Shiv and
coworkers (2005) used an investment task and proved that patients with VMPFC
lesions and individuals with long-term substance dependence (SD) had a higher
overall financial gain than normal controls. This apparent gain of function
associated with the neurological conditions has been attributed to lesions in the
neural circuits underlying emotions, which made the patients more predisposed to
taking risk, and thus gaining more (Shiv, Loewenstein & Bechara, 2005).
It is obvious that any conclusion regarding the good or bad impact of

emotions on decision-making is an over-generalization. The most one could say is
that emotions have a significant impact on decision-making, but the direction of
this impact seems to depend on the task that is used. There are also other decision-
making tasks used by experimental economic psychologists (e.g., dictator game,
investment game, public goods game, prisoner’s dilemma), some of which will be
briefly presented in the following paragraphs. Besides experimental studies that
have offered control for behavioral and neural variables involved in decisions,
behavioral economics has also dealt with wider and more ecological aspects of
economic decisions, in relation to topics like market prices, allocation of resources,
prediction and entrepreneurial attitudes (e.g., Salzman & Trifan, 2005). Since an
exhaustive review of these topics is not the purpose of this paper, we have focused
on the implications of emotions and individual differences in experimental tasks.
Individual differences in decision-making
While scientists were originally interested in emotions as a source of inter-

individual variability, research went further and revealed even more subtle
differences between decision-makers in particular decision tasks. We will review
the effects of individual differences separately for cooperation and risk-taking
tasks.
Cooperation and decision-making
Cooperation in most animal species, including humans, is considered to

have an adaptive function for the survival of the species. In modern societies,
cooperation is based on social norms and sometimes obeying the rules is due to
their legal enforcement (Fehr & Fischbacher, 2004). Researchers have come up
with two different explanations for cooperation among humans. The first states that
people have a sense of fairness that rules their behavior, according to which they
treat others fairly and pretend to be treated the same. A second possibility would be
that people are selfish: they are aware of the “irrationality” of others, and they
realize that unfair offers might be rejected so they try to act fair in order to have the
desired benefits. The norm of conditional cooperation prescribes that one should
cooperate if the other group members also cooperate, whereas the failure of others
is a legitimate excuse for individual failure. The norm is violated if an individual
defected even though the other group members cooperated, a situation in which the
defector can be punished.
Just by looking into the behavioral patterns of participants in various
economic games, it becomes apparent there are different types of behaviors.
However, what behavioral economists understand by the concept of “type”
is somehow more restricted than the understanding of the same concept
in psychology, for the former sense strictly refers to a particular game theoretical
Box 3 – The public goods game and the circular public goods game
In the PGG, groups of 6 players are given an endowment of tokens and must allocate
them between a private account and a group account. At the end of each round, tokens
put in the private account return to the player at the same value, but tokens put in the
group account are multiplied by the experimenter and then divided equally between the
group members. The best output for the group would be if everyone would put
everything in the group account. For one individual, the best payoff would be in the
case in which everyone else would allocate everything to the group account and the
individual would put everything in his/her private account. Following game theory,
those who contribute nothing are called "defectors", as opposed to the contributors who
are called "cooperators". The defector is also called a "free rider".
In the circular PGG, at the beginning of each round of play, participants simultaneously
make an initial allocation of tokens between their private and group accounts.
Subsequently, one player at a time is told the aggregate contribution to the group
account and allowed to change his or her contribution. The play continues with each
player in turn given a chance to change his or her contribution, and ends at a pre-
determined random point that is unknown to the participants. At the end of the game,
payoffs are determined by the final allocation of tokens to the group and private
account.
environment, while the latter is used to capture behavioral consistency across

settings.
The public goods game (PGG) is one of the most frequently used tasks to
study cooperation (see Box 3). Using this game, researchers have found various
individual behavior patterns. One classification came from Suleiman and Rapoport
(1992) who suggested that there are three types of players: those who were
concerned with equity, those who tried to maximize their own profit and those who
did not fit easily in a category. After that, Weimann (1994) proposed another
categorization: cooperative types, strong free riders (i.e., who contribute zero to the
public good in every round of the game) and weak free riders (i.e., who contribute
a positive amount, but not equal to their entire endowment). Another research
group suggested a four-part scheme in which players were classified as
“conditional cooperators”, “free riders”, “hump-shaped” and “others” (see
Fischbacher, Gächer, & Fehr, 2001). By looking at these classifications, one could
notice that each one consistently categorized free riders and cooperators separately,
which might indicate that these types are at the poles of a continuum.
Kurzban & Houser (2001, 2005) used a modified version of the PGG that
they named “the circular public goods game” (see Box 3) and they found that
players could be categorized as strong free riders (28%), reciprocators (29%) and
strong cooperators (25%), with the rest of the participants behaving very
differently from one round to another. One interesting result from these studies
referred to the effect that free riders had on the group dynamics: the presence of
one free rider in the group determined other players to constantly decrease their
group contribution, thus negatively affecting cooperation. On the other hand,
groups without free riders had a larger rate of contribution. The results of Kurzban
and Houser concerning players’ classification are in line with others from social
psychology, suggesting that people can be classified as competitors (i.e., motivated
to achieve better payoff than others), cooperators (i.e., motivated to try to increase
group welfare) and individualists (i.e., motivated to serve their own interests). The
similarities between these two classification systems are a proof that economists
and psychologists, using different tools, but studying the same reality, have come
up with similar results.
Besides cooperation there are other two variables with important roles in
exchange: trust and reciprocity. Trust refers to the voluntary transfer of a good or
favour to someone else, with future reciprocation expected, but not guaranteed.
Reciprocity is voluntarily repaying a trusting move at a later point in time,
although defaulting on such repayment is in the short-term self-interest of the
reciprocator. The Trust Game (TG; see Box 4) is easily used to evaluate trust and
reciprocity in humans. McCabe and Smith (2000) used this task and they found
that people are more irrational than normative theory would predict. The results of
their experiment are shown in Box 4 and can be summarized as follows: 12 of the
24 first movers trusted their counterpart and moved down. Their trust was
rewarded by 75% of their counterparts who reciprocated by moving down. First
movers who moved down made somewhat more than those who moved right.
While economists do not have the theory needed to explain the observed variability
in trust and cooperation, there are at least two different psychological explanations
for this situation. On one hand, social and personality psychologists have
developed personality scales on which they can describe and predict behavioral
variability in different situations. On the other hand, evolutionary psychologists
have focused on how the existence of cooperators (i.e., individuals who trust and
reciprocate) supports the emergence of non-reciprocators or “cheaters” who
consistently tend to take advantage of trusting people. At this point it is obvious
that economic theories are incapable of predicting and explaining human economic
behavior by themselves and psychologists should step into the picture and use their
knowledge to improve our general understanding of the topic.
A history of exchange might have led humans to come equipped with
cognitive mechanisms designed to detect cheaters. Without such a mechanism,
potential participants in a social exchange would continuously be taken advantage
of (e.g., see Cosmides, 1989). To test the hypothesis that humans can remember
better the faces of the cheaters compared to cooperators, Yamagishi and co-
workers (2003) presented their participants photos of people who cooperated and
who defected on a Prisoner’s Dilemma game (PD; Box 5) and, following a
distracter task, participants had to recognize the photos they have seen previously.
Box 4 – The Trust Game
The $10 Trust Game is a simple bargaining game. Numbers in decision nodes reflect
temporal order as well as which player moves at that node. Payoffs are shown in the
boxes at each endpoint, with a Player 1’s payoff above Player 2’s. Players alternate in
moving along the decision tree by selecting between the branches departing from their
decision node. Player 1 moves first and faces two options. He or she can move right,
avoiding interaction and ending the game. In this case each participant receives $10. A
riskier but potentially more rewarding move is for Player 1 to move down and give
Player 2 a chance to move. In this case whatever Player 2 does, joint payoffs double
(from $20 to $40) representing the gains from cooperation. Player 2 now faces two
options: he or she can defect by moving down, take the entire joint payoff of $40 and
leave Player 1 with nothing. Alternatively, he or she can move right. Such a right
move by Player 2 gives both players more than if Player 1 had moved right and ended
the game ($15 vs. $10 for Player 1, $25 vs. $10 for Player 2). Player 1 signals to his or
her anonymous counterpart through his or her very move. Moving right conveys
distrust in Player 2. Moving down signals trust and a desire to arrive at the mutually
advantageous outcome of [15; 25].
The non-cooperative equilibrium in this two-stage game, arrived at by backward

induction, is so easy to determine that it is hard to imagine that any subject might not
fully grasp the risks of deviating from it.
The results supported a domain-specific cheater detection model because

participants recognized significantly more cheaters than cooperators. The authors
suggested that these results would prove that cheaters’ facial expressions might
look different from those of cooperators, possibly due to beliefs and personality
traits that make them less ideal exchange partners, and the human mind might be
capable of picking up on subtle visual cues that cheaters’ faces give off. Still,
considering that there were no personality traits measured in the study, to support
this later idea, we believe that further research should be done on this topic before
claiming that personality traits could be “read” on somebody’ s face. Nevertheless,
the idea of one being able to detect and remember cheaters more easily is
evolutionary plausible and it has some empirical support.
Kurzban and Houser (2001) have tried to relate various personality
dimensions to cooperation in the PGG. They used the Machiavellianism (Mach)
scale (Christie, 1970), the Self-Monitoring Scale (Snyder, 1974), the Big Five
Inventory (Benet-Martinez & John, 1998), the Rosenberg self-evaluating scale
(Rosenberg, 1965), the Locus of Control Scale (LOC; Rotter, 1966), and they also
looked for gender differences. Significant positive correlations with cooperation
have been found for gender, with males being more cooperative than females, self-
monitoring, neuroticism, conscientiousness, and self-esteem. These results are in
agreement with some previous studies, but there are also some notable
disagreements. For instance, the fact that males are less likely to be free riders is
consistent with the study of Sell (1997), but it is not in line with other results
(Seguino, Stevens & Lutz, 1996). Also, the results concerning neuroticism and
cooperation conflict with earlier findings (Ashton, Paunonen, Helmes & Kackson,
1998). The authors acknowledged that more research is needed to relate
cooperation types to specific personality traits in the PGG (Houser, personal
communication).
Using the TG and the Mach scale, Gunnthorsdottir and co-workers (2002)
extended the empirical support for the idea that people with contrasting scores on
Mach scale behave differently in cooperation games. Thus, according to these
results, the participants with high Mach scores would reciprocate significantly less
than those with average and low scores (Gunnthorsdottir, McCabe & Smith, 2002).
In a broader sense, the authors implied that the scale would predict people’s
trustworthiness.
Boone and coworkers (1999, 2002) indicated that participants with internal
LOC were more likely than externals to play so as to try to influence the behavior
of other players in order to achieve their goals in social dilemmas situations. In
their experiment with a repeated PD, this meant cooperating early to encourage
reciprocal cooperation from others later in the game, but defecting on the last
move. In contrast, externals played less strategically, and showed less variation in
their play. The same authors also showed that cooperation in PD games was
correlated with Zuckerman’s scale of sensation seeking and with high scores on
self-monitoring. Another study that is worth mentioning was conducted by
Danheiser and Graziano (1982), who found that high self-monitors, unlike lows,
increased their rate of cooperation in a two person PD game when they believed
that they were going to have further social interactions with the other player in the
game, supporting the idea of Boone, De Brabander, Carree, de Jong, van Olffen,
and van Witteloostuijn (2002). Finally, there was also a study involving the Mach
scale, indicating that high Machs, being both exploitative and cynical, do not
cooperate in PD games, but also expect less cooperation from others (Orbell &
Dawes, 1993).
Box 5 – The Prisoner’s Dilemma
The classical prisoner's dilemma (PD) is as follows:
Two suspects, A and B, are arrested by the police. The police have insufficient
evidence for a conviction, and, having separated both prisoners, visit each of them to
offer the same deal: if one testifies for the prosecution against the other and the other
remains silent, the betrayer goes free and the silent accomplice receives the full 10-
year sentence. If both stay silent, the police can sentence both prisoners to only six
months in jail for a minor charge. If each betrays the other, each will receive a two-
year sentence. Each prisoner must make the choice of whether to betray the other or to
remain silent. However, neither prisoner knows for sure what choice the other prisoner
will make. So the question this dilemma poses is: What will happen? How will the
prisoners act?
The dilemma can be summarized thus:
Prisoner B Stays Silent Prisoner B Betrays

Prisoner A serves ten years
Prisoner A Stays Silent Both serve six months
Prisoner B goes free
Prisoner A goes free
Prisoner A Betrays Both serve two years
Prisoner B serves ten years
The dilemma arises when one assumes that both prisoners only care about minimizing
their own jail terms. Each prisoner has two options: to cooperate with his accomplice
and stay quiet, or to defect from their implied pact and betray his accomplice in return
for a lighter sentence. The outcome of each choice depends on the choice of the
accomplice, but the player must choose without knowing what their accomplice has
chosen to do.
If evaluated from the perspective of the optimal outcome for the group (of two
prisoners), the correct choice would be for both prisoners to cooperate with each other,
as this would reduce the total jail time served by the group to one year total. Any other
decision would be worse for the two prisoners considered together. When the prisoners
both betray each other, each prisoner achieves a worse outcome than if they had
cooperated.
The game can be played one time (one shot PD) or it can be played repeatedly with the
same pair of participants (repeated PD).
Meyer (1992) found that low Machs refused low offers when they played
responders in the UG, suggesting that pursuing fairness norms was more important
to them than the small gain they could have obtained by accepting the offer. High
Machs, on the other hand, have been shown to be more likely to opportunistically
exploit the trust of a counterpart. So, in accordance with other results using the
Mach scale, it appears that, independent of the task that is used, high Machs tend to
be more competitive and opportunistic, while low Machs cooperate more. Using
the same task, Brandstätter & Königstein (2001) showed that the proposers, who
scored high on independence and tough-mindedness, two global personality
dimensions tapping selfishness, demanded higher return shares than the proposers
who scored low on these dimensions. Regarding rejection decisions, it is to be
expected that reciprocity-oriented responders (i.e., persons who are either
emotionally unstable and extraverted or emotionally stable and introverted) reject a
proposal more often than others. Rejection of an unsatisfying offer is interpreted as
an act of angry retaliation (negative reciprocity) against an interaction partner who
violates the social norm of equity. In a recent study (Heilman, Miu, & Houser,
2006), anxiety-neuroticism levels were consistently related to different
motivational strategies in the UG. The decision-making task included three
successive UG games, differing on two dimensions: the first stage was a standard
UG; in the second one, we increased the stake to be divided; and in the third stage,
we used a stake equal to the one used in the first stage of the game, but the
instructions were changed so as, if the responder would reject the offer, the money
would be subtracted from the total gain of the proposer. The results showed that
proposers with high anxiety-neuroticism scores made significantly more
advantageous offers in the second stage of the game, for they were motivated by
the possibility of a higher gain, while proposers with low anxiety-neuroticism
displayed a similar type of behavior in the third stage of the experiment, in order to
avoid the risk of losing some of the previously earned money. Anxiety-neuroticism
might thus be related to different motivational strategies in the UG (see Heilman,
Miu & Houser, 2006 2 ).
Taken together, these findings clearly show that individuals behave
strikingly different, even when confronted with the same economic game situation.
It follows that textbook economic (game) theory misses an important part of the
picture. Any game-theoretic exercise to understand (non-) cooperative behavior in
a manner that is not psychologically informed can only provide, at best, a crude
benchmark prediction of average behavior. In our view, future research should
therefore focus more on differences instead of similarities between individuals in
order to increase our understanding of real-life cooperation. This implies, of
course, a move beyond the experimental setting and further into field studies.
2
See also Heilman et al. in Proceedings of the 2006 IAREP-SABE Congress, Paris, 5-8
July 2006.
Risky decision-making
Risk-taking is an important component of decision-making. Risk situations

commonly require choosing between, on one hand, an option with the potential for
a high-magnitude positive outcome associated with the possibility of large adverse
outcomes, and, on the other, a choice with a smaller, but more certain beneficial
outcomes (see Leland & Paulus, 2005). Like decisions involving cooperation, risky
decisions have also been related to various personality traits. Still, along with the
obvious drawback of predicting actual behavior from self-reported ratings, two
other factors might account for the gap between the experimental studies of risky
decision-making and correlational studies of personality and risk taking. First,
personality psychologists and decision-making researchers operationally define
risk in different ways. Whereas hypothetical gambles or choice dilemmas are the
favorite stimuli in experimental research, psychologists examine risk-taking
behavior in applied settings, such as driving behavior (Ulleberg & Rundmo, 2003)
and health behavior (Lauriola, Russo, Lucidi, Violani, & Levin, 2005). Second, the
few available experimental studies of personality and decision-making under risk
investigated lower level traits, like sensation seeking, impulsivity or anxiety, in
highly specific tasks, thus making generalizations quite difficult.
When talking about risky decisions and personality, sensation seeking (SS)
is one of the most frequently investigated traits. It is not surprising why M.
Zuckerman (1994) added the legal and financial risks to the physical and social
risks the sensation seekers are willing to take. According to the author, in tasks
with hypothetical gambles, high SS tend to bet more and at higher odds than low
SS. Wong and Carducci (1991) administered the SS scale from the Zuckerman
Kuhlman Personality Questionnaire along with a risk attitude survey, and
confirmed Zuckerman’s results: high SS participants, particularly males, took more
risk than low SS.
Impulsivity (Imp) is a personality trait that affects behavior in significantly
different ways. Whereas high Imp generates careless decisions and risk-taking,
extremely low Imp can lead to an overly careful analysis of the alternatives,
creating a conflict of values and unpleasant emotions. Individuals of low Imp could
then prefer the riskless option to reduce the unpleasant feelings (Dahlbäck, 1990).
Considering that impulsivity is a characteristic of the Type A behavior, Carducci &
Wong (1998) compared the financial risk-taking of Type A and Type B subjects,
showing that Type A subjects take more risks in everyday financial decisions.
Another important study (Zermatten, Van der Linden, d’Acremont, Jermann &
Bechara, 2005) investigated the relations between the four facets of Imp - urgency,
lack of premeditation, lack of perseverance, and SS relative to performance in the
IGT. The results showed that only lack of premeditation was linked to decisions in
the IGT, suggesting that premeditation is related to decision-making influenced by
somatic markers. The fact that SS was not related to the task performance is in
contradiction with Zuckerman’s studies. Still, we should not rash into conclusions,
because this aspect needs further investigations. It might be possible that the risk
characteristics of the IGT could be different than those of the tasks used by
Zuckerman, which would make the two lines of results difficult to compare.
Lauriola and Levin (2001) investigated the effects of the personality traits
included in the Big Five in relation with risk-taking, both in the gain, and lose
domains. In the domain of gains, participants with high scores on Openness to
Experience had the tendency to take riskier decisions, whereas high scores on
Neuroticism were associated with less risk-taking. There was also a tendency for
Neuroticism to be positively correlated with greater risk-taking for loses. The other
factors were not significantly associated with risk-taking.
Individuals with high trait anxiety (TA) have a generalized tendency to
over-estimate the risks. Butler & Matthews (1987) showed that state anxiety is
related to over-estimation of risk for situation-specific outcomes, while TA
predicted a generalized over-estimation of risks for all the outcomes. In a recent
fMRI study, Paulus and co-workers (2004) proved that high TA participants did
not differ in their behavioral performance in a prediction task when compared to
average TA subjects, but high TA subjects devoted more processing resources to
decision-making, oprationalized as higher anterior cingulate activation. Miu,
Heilman and Zlati (2006) studied the effects of TA on behavioral performance and
physiological response in the IGT. We found that low TA participants had a better
behavioral performance than average and high TA individuals. When we compared
the amplitude of the SCR in these participants, high TA participants had also a
higher anticipatory SCR response, suggesting that this trait was associated with
increased anticipatory anxiety in IGT (for discussion see Miu, Heilman, & Zlati,
2006).
A brief look into neuroeconomics
There has been a general agreement that psychological studies can help
explain and predict decision-making in specific situations. It has become obvious
in recent years that neuroscience can also contribute to the field of decision-
making. To keep the rationale of this line of investigation simple, neuroscientists
stated that, since decision-making is a cognitive process, the brain supports it and,
therefore, if we want to know more about it we should also look directly at the
brain. In recent years, neuroscientists began studying decision-making from a
neurobiological perspective in a more systematic manner than before. This attempt
has led to a new field, called neuroeconomics, which is thought to reserve a new
understanding of decision-making in humans. From this perspective, the behavior
of the decision-maker is the result of specific neurobiological mechanisms.
Neuroeconomics could contribute to this field by creating composite models of
economic decision, based on a psychologically informed description of human
economic decisions and an understanding of the underlying neurobiology.
The tools that are used by neuroeconomists can be roughly classified into
two categories: procedures for measuring electromagnetic activity of the brain
(e.g., electroencephalography and magnetoencephalography) and those sensitive to
changes of cerebral blood flow or metabolism (e.g., positron emission tomography,
fMRI). However, it is not the purpose of this article to provide details about these
methods (e.g., see Kenning & Plassmann, 2005; Miu & Olteanu, 2004). Using
these tools, we can investigate brain processes while the participants are engaged
in a decision-making task, and relate behavioral performance to brain activation
and deactivation patterns. For instance, Sanfey and co-workers (2003) have used
fMRI to monitor brain changes during the UG and they were able to prove that
perceived unfairness and rejection of unfair offers is associated with activation in
the anterior insula and the dorsolateral prefrontal cortex. Another famous study
conducted by E. Fehr (Kosfeld, Heinrichs, Zak, Fischbacher & Fehr, 2005) showed
that by giving participants exogenous oxytocin, a neuropeptide that plays a key
role in social attachment and affiliation in non-human mammals, caused a
substantial increase in trust among humans, affecting individuals’ willingness to
accept social risks arising through interpersonal interactions. This kind of results
might have major clinical implications for patients with mental disorders
associated with social dysfunctions (e.g., social phobia, autism).
Conclusions
In this paper we have tried to emphasize that individual differences,

especially personality traits and emotional reactions, influence decision-making.
Although significant research has been reported to date, it is noteworthy that
different research groups have used various personality measures in several
decision-making tasks, a situation resulting in disparate pieces of information that
are difficult to combine in a big picture. For this reason, it is of crucial importance
that psychologists, cognitive neuroscientists, and economists contribute further to
this field. While the development of experimental decision tasks has to continue, it
is at the same time necessary to keep in mind the limits of this kind of research.
Real-life decisions involve complex interactions of many neural and behavioral
variables, they are made by multiple-response cognitive systems and they are
context-dependent. However, a major advantage of the collaboration between
psychologists and neuroscientists focused on fundamental research, on one part,
and economists focused on applied research, on the other, is that a balance between
experimental reductionism and applied value is guaranteed by the very
development of the fields that are part of behavioral economics. Experimental
studies of emotions in decision-making will have to include other emotions like
greed, frustration, fear, spite or guilt. Emotions depend on the complexity of the
adaptive niche of an individual and the intensity and variety of human emotions are
thus calibrated by the adaptation to the sophisticated demands of interpersonal,
socio-cultural and physical contexts (Dolan, 2002). A more explicit categorization
of experimental decision tasks according to the levels of analysis of the subjacent

information processing (e.g., Marr’s computational/algorithmic/implementational
or Pylyshyn’s semantic/syntactic/physical levels) would also offer a more coherent
perspective of the research in behavioral economics and neuroeconomics. The
differential involvement of cognitions and metacognitions, emotional strategies
and tactics, interests and framing biases would also refine the behavioral analysis
of decisions.
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Cogniţie, Creier, Comportament / Cognition, Brain, Behavior

THE IMPACT OF EMOTIONS AND INDIVIDUAL

KEYWORDS: decision-making, behavioral economics, emotions, personality

Economists first approached decision-making processes in their efforts to

physiology, mechanics, physics, astronomy, and oceanography 1 , put forward the

considerable progress in understanding decision-making, and economists have

Emotions and decision-making

Box 1 – The Iowa Gambling Task

Some major research results:

• Patients with lesions of the ventromedial prefrontal cortex tend to choose

Box 2 – The Ultimatum Game

It is obvious that any conclusion regarding the good or bad impact of

Individual differences in decision-making

While scientists were originally interested in emotions as a source of inter-

Cooperation and decision-making

Cooperation in most animal species, including humans, is considered to

environment, while the latter is used to capture behavioral consistency across

Box 4 – The Trust Game

The non-cooperative equilibrium in this two-stage game, arrived at by backward

The results supported a domain-specific cheater detection model because

Box 5 – The Prisoner’s Dilemma

The classical prisoner's dilemma (PD) is as follows:

The dilemma can be summarized thus:

Prisoner B Stays Silent Prisoner B Betrays

Risk-taking is an important component of decision-making. Risk situations

A brief look into neuroeconomics

In this paper we have tried to emphasize that individual differences,

of experimental decision tasks according to the levels of analysis of the subjacent

Kenning, P., & Plassmann, H. (2005). Neuroeconomics: An overview from an economic

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