Decision Decisions Decision: The neuro-economics of decision making.

Decisions Decisions Decisions: The neuro-economics of decision making

Decisions are constantly being made. These decisions can be as small as deciding what to wear that day, what to eat for breakfast, or what to make for dinner. But they can also be as big as whether to have a kid, when to get married, or if you should start a business. With such larger decisions comes the fear of effort wasted, unwanted outcomes, or regret. Decision making, on a bigger level, can be quite complex and even the most thought out plan is still susceptible to massive costs. 

Sunk cost is a decision that requires an investment of time, money, and effort that can not be given back. It is said that decisions should be made based on the expected return, and many do make decisions based on their perceived outcome. Dr. Brian Sweis, a psychiatric neuroscientist at Mount Sinai, came to our class and spoke on his paper regarding sunk cost in human and non-human subjects. His research touches on the fact that humans are quite sensitive to sunk cost when in the midst of a decision and wanted to find if this was similar in non-human animals (Sweis et al. 2018). By setting up two stages of a decision, offer and waiting, he found that animals and humans alike were more willing to judge decisions based on their outcome more in the offer phase than in the waiting phase. It is when decisions are re-evaluated in the waiting phase that sunk cost fallacy, the reluctance to abandon a decision because of the amount of effort put into it, is made. 

In the world of business, sunk costs are very detrimental to a business if the product that is taking so much time and effort does not yield the wanted sales outcome. In the past, businesses have tried to mitigate the losses by sending out polls asking consumers if they would buy a product or spending lots of money on marketing. Dr. Colin Camerer spoke with Bloomberg radio host Barry Ritholtz to discuss the advancements being made in the world of neuro-economics. According to Dr. Camerer and his lab at CalTech, decisions made by the consumer on whether to buy a product happen before the consumer can even process it (Ritholtz, 2024). By looking at fMRI studies, Dr. Camerer found that consumers who are actually going to buy a product have activity in the midbrain that is seen before the participants say yes. Smaller decisions like buying certain goods are made within a 10 to 30 second time frame before a person is even able to process their decision. This activity is not seen when buyers are asked a hypothetical question of whether they would buy a product or not and answer yes. The reason that polls that ask buyers these hypothetical questions do not do a good job at projected actual outcome is because there was not true yes to the question. He also found, through eye tracking technology, the more a consumer looks at the price of something, the more they are willing to buy it. In hypothetical situations, such as the polls, buyers pay no mind to the price when saying yes thus not actually making a full decision. Understanding the decision making patterns of consumers can lower the amount of losses companies have when coming out with new products thus making their decisions more sure and have the wanted outcome. 

Of course, having the power to understand people’s buying behaviors based on neurological markers is quite hard to do in a normal business setting, as well as a little scary on the consumer side of things. This sort of data collection is already being done in many media companies and is looked down upon for its invasiveness. Understanding someone's decisions to better inform your own is not inherently bad but when done in ways that consumers do not know or consent to is not ethical, especially if only to benefit a company's profits. If used in an ethical manner, if found, this sort of understanding of consumer decision making can benefit business during the offer stages of making a decision, when the outcome is taken into consideration the most. It could also be good for consumers as it would decrease the amount of unwanted product circulating. Neuro-econimics is a fast growing sector of neuroscience that is making strides in understanding decision making and how to utilize it for the better. 

References

Stein, R. (2025, April 11). White House orders NIH to research trans 'regret’ and ‘detransition’.NPR.https://www.npr.org/sections/shots-health-news/2025/04/10/nx-s1-5355126/trump-nih-trans-regret-detransition-research 

Sweis, B.M., Abram, S.V., Schmidt, B.J., Seeland, K.D., MacDonald III A.W., Thomas, M.J., & Redish, A.D.(2018). Sensitivity to “sunk costs” in mice, rats, and humans. Evolutionary Cognition. 361, 1780-181.