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Hence, the perceived midpoint of the difference of joy has the same utility as the
certainty equivalent of an indifference decision between a fifty-fifty lottery and a sure
payment. It follows that a comparison of these two methods will not yield different
results if Expected Utility Theory holds.
The CE method as used for the development of Prospect Theory differs in this
comparison, given that the utility of an indifference decision between a sure outcome
and a lottery does not equal the given probability p as a result of the weighting func-
tion, consequently
10.5
.
The Probability Weighting Function is stated to be inverse S-shaped, with a probabili-
ty of 50 % being affiliated to a section of underweighting probabilities [2, 5, 6]. Fur-
ther studies [7, 8] also confirmed that the crossover point from an overweighting to an
underweighting of probabilities is about
0.35
. As a result, the value of
0.5
is
actually lower than 0.5, leading to the conclusion that a comparison of these two me-
thods yields different results, namely
.
Different results between CU and CE would also be expected by theories of Regret
[9], Disappointment [10] and Tension [11], formed on the basis of additional effects
throughout the decision process, such as emotional reactions etc. In order to investi-
gate the neural underpinnings of risky and riskless decisions event-related brain po-
tentials (ERPs) were used, an EEG technique where brain potentials are recorded
time-locked to external stimuli [12]. Different ERP components can be characterized
by three criteria: time, place and polarity of the components' appearance. The P300
(or P3), a positive deflection at centro-parietal electrode sites peaking at 300 ms or
more after the stimulus' presentation, is basically related to the cognitive processes
like working memory, allocation of attentional resources, stimulus novelty and the
stimulus' dependence on a given task [13-16]. Other cognitive processes having an
impact on the P300 variability like stimulus frequency [13, 14], emotional value [14,
17, 18] or the stimulus' relevance can be traced back to the aforementioned concepts.
Coming back to the economical question that CU equals CE
,
the P300 can be uti-
lized to reveal processes that are not reflected in observable behavior. For example,
according to Prospect Theory the information of performing a lottery should result in
a devaluation of the amount used in this task. But when does this devaluation take
place? And is this devaluation reflected in the processing of the information when
providing stimuli? In the present paper the focus is directed on the attention-capturing
processes of the bisection method and the certainty equivalent method. The expected
result for the riskless method would be less attention allocation processes compared to
the method that is connected with risk.
2 Material and Methods
2.1 Participants
16 right-handed (9 women) and neurologically healthy subjects participated in this
study after giving informed consent. They were paid 7 Euro per hour for their
participation.
