Elqayam, Shira

Marchiori, Davide

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Davide Marchiori

Shira Elqayam

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Frontiers in Psychology

Physiological Plausibility and Boundary Conditions of Theories of Risk Sensitivity

Marchiori, D.

De Montfort University Open Research Archive

Physiological plausibility and boundary conditions of theories of risk sensitivity: Commentary on Yechiam & Telpaz.

Davide eMarchiori

Shira eElqayam

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Toward a Physiologically Grounded Theory of Risk Sensitivity: Commentary on Yechiam &amp; Telpaz

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Physiological plausibility and boundary conditions of theories 
of risk sensitivity
Davide Marchiori1* and Shira Elqayam2
1 Department of Economics, National Chengchi University, Taipei, Taiwan
2 Department of Psychology, Shira Elqayam, De Montfort University, Leicester, UK
*Correspondence: davide@nccu.edu.tw
A commentary on
To take risk is to face loss: a tonic pupil-
lometry study
by Yechiam, E., and Telpaz, A. (2011). Front. 
Psychol. 2:344. doi: 10.3389/fpsyg.2011.00344
The contribution by Yechiam and Telpaz 
(Y&T) published in Frontiers in Cognitive 
Science places it in a corpus of literature 
which bridges at least three different disci-
plines, i.e., psychology, economics, and neu-
roscience. The goal of this line of research is 
to explore the neurological and physiologi-
cal underpinnings of one of the central top-
ics in judgment and decision-making (JDM) 
research – choice behavior in decisions from 
experience. Y&T successfully contributes to 
this goal by demonstrating a novel effect 
that losses increase experimental partici-
pants’ arousal as measured by pupil dilata-
tion, which in turn positively correlates with 
a risk aversion behavior. They hypothesize 
that participants’ attention is increased in 
decision problems involving losses, which 
trigger an innate prudent behavior in situ-
ations entailing danger and/or hazard. 
Interestingly, Y&T find that the nature of 
attention is not selective, i.e., when losses are 
present, participants are shown to devote 
more attention to the task as a whole rather 
than to the single negative outcomes, in 
contrast to Prospect Theory’s loss aversion.
Y&T’s contribution can be highlighted 
in the context of research on the neural 
mechanism underlying loss aversion (see, 
for example, Breiter et al., 2001; Tom et al., 
2007). These studies suggest that behavioral 
loss aversion in decisions from description 
reflects an asymmetric response to gain and 
losses in the neural system encoding for 
reward values (the ventromedial prefron-
tal cortex, orbitofrontal cortex, and ventral 
striatum). What makes Y&T’s contribution 
particularly noteworthy is their mediating 
attentional hypothesis, which links physi-
ological mechanisms to the psychological 
processes involved in experience-based 
decisions.
One of the possible future developments 
from Y&T’s work is that of drawing on their 
attentional hypothesis to explain depend-
ence of risk aversion on the payoff level, as 
observed in the Experimental Economics lit-
erature (Harrison et al., 2005; Holt and Laury, 
2005). Specifically, it has been observed that 
participants’ degree of risk aversion increases 
significantly as actual positive payoffs are 
scaled up, and that this effect is negligible 
when payoffs are hypothetical. These findings 
provide an opportunity to widen the scope of 
the attentional hypothesis. Specifically, pay-
offs corresponding to large cash amounts 
might have the analogous effects of losses of 
increasing arousal and of triggering a higher 
level of risk aversion; whereas hypothetical 
payoffs might result in a substantial inhibi-
tion of attention. Therefore, the motivation 
implied by real stakes can be interpreted as 
one of the possible boundary conditions (see 
below) for Y&T’s attentional hypothesis, giv-
ing rise to a question of the relative weight 
of attention and motivation in shaping risk 
attitudes.
Y&T’s report can also be contextual-
ized within the wide literature on indi-
vidual differences in reasoning, judgment 
and decision making (e.g., Stanovich and 
West, 2000) and their implications to the 
rationality debate. The prototypical finding 
in that literature is the correlation between 
cognitive ability and normative respond-
ing, with a strong emphasis on normative 
evaluation of rationality. This so-called 
“normativist” approach has recently been 
subject to criticism (Elqayam and Evans, 
2011) as unhelpful in developing a psycho-
logical theory of human rationality. It is 
therefore noteworthy that Y&T take their 
individual differences work in a completely 
different direction, with what seems to be a 
purely ‘descriptivist’ approach, with no nor-
mativist connotations. As one reviewer of 
this manuscript put it, any behavior in this 
setting could be justified as ‘rational’. The 
behavioral patterns described vary qualita-
tively rather than quantitatively. This is typi-
cal of descriptivist approaches to cognitive 
variability higher mental processing (Evans 
and Elqayam, 2011). Given the dearth of 
such focus in higher mental processing, this 
is a welcome development.
Lastly, a potentially significant issue 
here is the implications to risk aversion 
as originally portrayed in prospect theory 
(Kahneman and Tversky, 1979). One could 
argue that Y&T contribute to defining 
boundary conditions for Prospect Theory, 
by proposing an alternative explanation for 
specific settings in which Prospect Theory 
is not supported by empirical evidence1. 
Indeed, as a unified theory of risk aversion 
is not yet at hand, knowing the range of 
application of each of the existing theories 
is crucial.
One reason that Y&T in particular, and 
decisions from experience in general, can 
define boundary conditions, is their focus on 
the processing level of analysis. Marr (1982) 
famously distinguished between three levels 
of analysis regarding any information pro-
cessing system: The computational level, 
which portrays the function computed by 
the system (e.g., arithmetic is a pocket calcu-
lator’s function); the algorithmic level, which 
has to do with processes (e.g., the calcula-
tor’s software); and the implementational 
level, which explores the physical under-
pinnings of the system – its hardware/wet-
ware characterization (e.g., the calculator’s 
1Note that Prospect Theory cannot explain the typical 
behavioral patterns found in decisions from experien-
ce studies (see, for example, Barron and Erev, 2003, 
and Erev and Haruvy, 2010), unless one assumes para-
meter values that imply no loss aversion, linear value 
function (at least with low stakes), and underweigh-
ting of rare events. We are grateful to an anonymous 
reviewer for pointing this out.
www.frontiersin.org February 2012 | Volume 3 | Article 33 | 1
General Commentary
published: 24 February 2012
doi: 10.3389/fpsyg.2012.00033
chip). Viewed in these terms, we see pros-
pect theory as portraying behavior mainly 
on the computational (i.e., functional) level 
of analysis; or, as some authors put it – an 
“axiomatic” system (see Wakker, 2010). In 
contrast, Y&T explore the attentional pro-
cesses (algorithmic level), and their physi-
ological underpinnings (implementational 
level). As Marr commented, levels of analysis 
interact, with different processes sometimes 
computing different functions, as is the case 
here. Research questions about processing 
and physiology are much rarer in judgment 
and decision making research than com-
putational level questions (although see, 
e.g., Breiter et al., 2001; Tom et al., 2007), 
and studies that combine several levels of 
analysis, as Y&T have done, are even rarer. 
This makes Y&T’s contribution of particular 
interest to scholars of human thinking and 
decision making.
Acknowledgments
We are grateful to Izhak Aharon and an 
anonymous reviewer for helpful comments 
on a previous version of the manuscript. This 
commentary also much benefited from dis-
cussions of the first author at the Erasmus-
Technion Workshop on Decisions and 
Predictions (January 2012, Ein Bokek, Israel).
RefeRences
Barron, G., and Erev, I. (2003). Small feedback-based 
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Breiter, H. C., Aharon, I., Kahneman, D., Dale, A., and 
Shizgal, P. (2001). Functional imaging of neural 
responses to expectancy and experience of monetary 
gains and losses. Neuron 30, 619–639.
Elqayam, S., and Evans, J. S. (2011). Subtracting ‘ought’ 
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Erev, I., and Haruvy, E. (in press). “Learning and the 
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Yechiam, E., and Telpaz, A. (2011). To take risk is to face 
loss: a tonic pupillometry study. Front. Psychol. 2:344. 
doi: 10.3389/fpsyg.2011.00344
Received: 06 December 2011; accepted: 30 January 2012; 
published online: 24 February 2012.
Citation: Marchiori D and Elqayam S (2012) Physiological 
plausibility and boundary conditions of theories of 
risk sensitivity. Front. Psychology 3:33. doi: 10.3389/
fpsyg.2012.00033
This article was submitted to Frontiers in Cognitive Science, 
a specialty of Frontiers in Psychology.
Copyright © 2012 Marchiori and Elqayam. This is an open-
access article distributed under the terms of the Creative 
Commons Attribution Non Commercial License, which 
permits non-commercial use, distribution, and reproduc-
tion in other forums, provided the original authors and 
source are credited.
Marchiori and Elqayam Physiology of risk aversion
Frontiers in Psychology | Cognitive Science  February 2012 | Volume 3 | Article 33 | 2


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Physiological Plausibility and Boundary Conditions of Theories of Risk Sensitivity

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