Neuro- economics - Economic buy, sell, save or trust based decision making

[papau]

http://www.latimes.com/news/custom/showcase/la-sci-brain18mar18.story

Anatomy of Give and Take
Economic theory goes only so far in explaining why people buy, sell, save or trust. Scientists are looking inside the mind for answers.
By Robert Lee Hotz Times Staff Writer March 18, 2005

HOUSTON — The two women had money in mind.

<snip>Belur's safest strategy was to hoard all of her money. Tang's most logical move was to cheat her partner at every opportunity.

There was a riskier but potentially more profitable way.

They could trust each other.

The experiment was part of a new frontier in the exploration of the brain — a field called neuro- economics that seeks to understand the biology underlying economic behavior.

In universities and research centers across the country, scientists are probing the brain with coin flips, $5 bills and gift certificates from Amazon.com. Bit by bit, they are assembling a mosaic of the financial brain, identifying how competing neural circuits shape decisions.

"We have started looking for pieces of economic theory in the brain," said New York University neuroscientist Paul Glimcher.

Researchers believe they can discover how neural networks affect the ways people buy and sell, splurge and save. They hope one day to understand how decisions percolating through the brains of billions of people, often acting at cross-purposes, interact to chart the course of financial markets and national economies.
<snip>

[papau]

1. why ones loses track of ones strategy - interesting?

<snip>
Tang could cheat her partner without fear of reprisal.

The most rational move for Belur, therefore, was to refuse to risk any money in this last round, to end the game richer than her trading partner.

Unknowingly, they had defied the rules of game theory. They should have betrayed each other at the earliest opportunity. Had trust hormones triumphed over the theorem of self-interest?
<snip>

Tang could not explain why she lost track of her strategy, and it puzzled her.

There was no way she could know whether — in the instant of decision — the internal compass of her brain had altered her choice.

[Warpy]

2. All you have to do is watch the last half hour

of any online auction to see that one at work.

It takes a great deal of discipline (or in my case, an upper limit on the amount a debit card can be used for) to avoid bidding against other people on an item one really wants to the tune of overpaying what one would pay in a bricks and mortar store.