To blow hot and cold under stress - neurohormonal moderators of revealed preferences

• Applicant: Professor Tobias Kalenscher, Ph.D.
• Subject Area: Biological Psychology and Cognitive Neuroscience
• Term: since 2021
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 458314306

Revealed preference theory provides a formal framework to infer consumer preferences from observable choices. It can predict out-of-sample choices from past revealed preferences under the assumption that preferences are stable over the time period of observation. However, there is evidence in the psychoneuroendocrinological literature that economic preferences depend, among others, on the neurohormonal state of the consumer, which is dynamic, flexible, and time-varying, but non-visible for an external observer, and partly inaccessible by introspection. For example, in the previous funding rounds, we have shown that psychosocial stress, or psychopharmacological manipulation of the stress neuromodulators cortisol (CORT) and noradrenaline (NA), altered altruistic, other-regarding preferences in a systematic, predictable, yet highly time-dependent way. By consequence, since preferences may change rapidly and drastically with hormonal fluctuations, choices may become inconsistent; i.e., a revealed preference at one point in time may not serve to predict a stressed consumer’s future preference even minutes after the preference has been initially revealed. However, this is by no means assured knowledge, it is equally plausible that stress only transiently results in larger choice variability that would merely be classified as increased decision noise by revealed preference markers (fuzzy hands) – a phenomenon that would not pose a serious challenge to revealed preference theory. The aim of this grant proposal is to evaluate, in participants of both genders, whether the effects of psychosocial stress (experiment 1) or psychopharmacological modulation of CORT and NA (experiment 2) on altruistic giving induce significantly inconsistent choice. Choice (in)consistency will be measured with the rigorous conceptual and quantitative benchmark of rationality (i.e., choice consistency) provided by revealed preference theory. To this end, we will adopt a modified dictator game in which participants make resource allocation decisions between themselves and another person. We manipulate the budget (the endowment to be shared) and the costs of giving (a “transaction cost” that participants have to pay to give money to the other). We predict that giving decisions are more inconsistent after psychosocial stress, or psychopharmacological challenge respectively, than after control manipulations. We furthermore expect that this increase in internal inconsistency is not (only) due to amplified decision noise, but due to genuine changes in social preferences, as measured by altered utility functions before vs. after stress, or drug action respectively. Our results will have implications for our understanding of the role of hormonal state changes in general, and stress effects in particular, on economic rationality.

• DFG Programme: Research Grants