Decision ruleIn decision theory, a decision rule is a function which maps an observation to an appropriate action. Decision rules play an important role in the theory of statistics and economics, and are closely related to the concept of a strategy in game theory. In order to evaluate the usefulness of a decision rule, it is necessary to have a loss function detailing the outcome of each action under different states. Given an observable random variable X over the probability space , determined by a parameter θ ∈ Θ, and a set A of possible actions, a (deterministic) decision rule is a function δ : → A.
Cingulate cortexThe cingulate cortex is a part of the brain situated in the medial aspect of the cerebral cortex. The cingulate cortex includes the entire cingulate gyrus, which lies immediately above the corpus callosum, and the continuation of this in the cingulate sulcus. The cingulate cortex is usually considered part of the limbic lobe. It receives inputs from the thalamus and the neocortex, and projects to the entorhinal cortex via the cingulum. It is an integral part of the limbic system, which is involved with emotion formation and processing, learning, and memory.
Functional magnetic resonance imagingFunctional magnetic resonance imaging or functional MRI (fMRI) measures brain activity by detecting changes associated with blood flow. This technique relies on the fact that cerebral blood flow and neuronal activation are coupled. When an area of the brain is in use, blood flow to that region also increases. The primary form of fMRI uses the blood-oxygen-level dependent (BOLD) contrast, discovered by Seiji Ogawa in 1990.
Medium spiny neuronMedium spiny neurons (MSNs), also known as spiny projection neurons (SPNs), are a special type of GABAergic inhibitory cell representing 95% of neurons within the human striatum, a basal ganglia structure. Medium spiny neurons have two primary phenotypes (characteristic types): D1-type MSNs of the direct pathway and D2-type MSNs of the indirect pathway. Most striatal MSNs contain only D1-type or D2-type dopamine receptors, but a subpopulation of MSNs exhibit both phenotypes.
NeuroeconomicsNeuroeconomics is an interdisciplinary field that seeks to explain human decision-making, the ability to process multiple alternatives and to follow through on a plan of action. It studies how economic behavior can shape our understanding of the brain, and how neuroscientific discoveries can guide models of economics. It combines research from neuroscience, experimental and behavioral economics, and cognitive and social psychology.
Risk premiumA risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. It is used widely in finance and economics, the general definition being the expected risky return less the risk-free return, as demonstrated by the formula below. Where is the risky expected rate of return and is the risk-free return. The inputs for each of these variables and the ultimate interpretation of the risk premium value differs depending on the application as explained in the following sections.
Mesolimbic pathwayThe mesolimbic pathway, sometimes referred to as the reward pathway, is a dopaminergic pathway in the brain. The pathway connects the ventral tegmental area in the midbrain to the ventral striatum of the basal ganglia in the forebrain. The ventral striatum includes the nucleus accumbens and the olfactory tubercle. The release of dopamine from the mesolimbic pathway into the nucleus accumbens regulates incentive salience (e.g.
Decision treeA decision tree is a decision support hierarchical model that uses a tree-like model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility. It is one way to display an algorithm that only contains conditional control statements. Decision trees are commonly used in operations research, specifically in decision analysis, to help identify a strategy most likely to reach a goal, but are also a popular tool in machine learning.
Decision analysisDecision analysis (DA) is the discipline comprising the philosophy, methodology, and professional practice necessary to address important decisions in a formal manner. Decision analysis includes many procedures, methods, and tools for identifying, clearly representing, and formally assessing important aspects of a decision; for prescribing a recommended course of action by applying the maximum expected-utility axiom to a well-formed representation of the decision; and for translating the formal representation of a decision and its corresponding recommendation into insight for the decision maker, and other corporate and non-corporate stakeholders.
Risk-seekingIn accounting, finance, and economics, a risk-seeker or risk-lover is a person who has a preference for risk. While most investors are considered risk averse, one could view casino-goers as risk-seeking. A common example to explain risk-seeking behaviour is; If offered two choices; either 50asasurething,ora50100 or nothing, a risk-seeking person would prefer the gamble. Even though the gamble and the "sure thing" have the same expected value, the preference for risk makes the gamble's expected utility for the individual much higher. 