The Cost Of Competition

Online, January 30, 2013 (Newswire.com) - In this study from Stanford University researchers investigate the neural correlates of competitive behavior. What often happens in competitive situations, which are a ubiquitous and essential part of economy from the micro (e-bay) to the macro (3G spectrum auctions) level, is that people get caught up in the competition so much that the end up paying more than they planned to, or even more than the value of the object itself. And as we have recently seen in the sports arena, competitive environments may lead to other kinds of poor decisions.

The researchers used a novel multi-player experimental setup, which involved five participants to be simultanously in a different MRI scanner while particpating in an auction. Using a computational model of the participants behavior they are able to show that people do not only value the economic outcome of a competition, but also value being the winner in and of itself (and dislike losing). As a result people are willing to lose some money in able to be the winner. Furthermore, they showed that those participants who cared the most about winning showed a stronger connectivity between social brain areas and the valuation network than those who cared less about winning. These results shed new light on our understanding of the impact of social evaluation on (financial) decision-making in competitive environments.

for more information see:
van den Bos, W., Talwar, A., & McClure, S.M. (2013). Neural correlates of reinforcement learning and social preferences in competitive bidding. Journal of Neuroscience. 33(5): 2137-2146.

http://decisionneuroscience.bits-of-information.org/p/publications.html