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Neural mechanisms mediating degrees of strategic uncertainty

Nagel, Rosemarie; Brovelli, Andrea; Heinemann, Frank; Coricelli, Giorgio

FG Makroökonomik

In social interactions, strategic uncertainty arises when the outcome of one’s choice depends on the choices of others. An important question is whether strategic uncertainty can be resolved by assessing subjective probabilities to the counterparts’ behavior, as if playing against nature, and thus transforming the strategic interaction into a risky (individual) situation. By means of functional magnetic resonance imaging with human participants we tested the hypothesis that choices under strategic uncertainty are supported by the neural circuits mediating choices under individual risk and deliberation in social settings (i.e. strategic thinking). Participants were confronted with risky lotteries and two types of coordination games requiring different degrees of strategic thinking of the kind ‘I think that you think that I think etc.’ We found that the brain network mediating risk during lotteries (anterior insula, dorsomedial prefrontal cortex and parietal cortex) is also engaged in the processing of strategic uncertainty in games. In social settings, activity in this network is modulated by the level of strategic thinking that is reflected in the activity of the dorsomedial and dorsolateral prefrontal cortex. These results suggest that strategic uncertainty is resolved by the interplay between the neural circuits mediating risk and higher order beliefs (i.e. beliefs about others’ beliefs).