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The Behavioral Economics of Anxiety

  • Ifat Levy
    Correspondence
    Address correspondence to Ifat Levy, Ph.D., Section of Comparative Medicine, P.O. Box 208016, New Haven, CT 06520; .
    Affiliations
    Section of Comparative Medicine and Department of Neuroscience, Yale School of Medicine

    US Department of Veterans Affairs, National Center for PTSD, New Haven, Connecticut
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      Individuals with anxiety disorders tend to focus on threat-related information and are more likely to interpret ambiguous information as negative than as positive (
      • Mathews A.
      • MacLeod C.
      Cognitive vulnerability to emotional disorders.
      ). Therefore, it is natural to assume that when anxious individuals make economic decisions, they preferentially attend to potential negative outcomes rather than positive outcomes. Consistent with this notion, a few studies have documented reduced economic risk taking in anxiety (
      • Hartley C.A.
      • Phelps E.A.
      Anxiety and decision-making.
      ). However, enhanced perception of potential losses—or loss aversion, as economists call it—is only one of several basic cognitive processes that may suppress risk taking. Prior studies have employed experimental paradigms that did not allow independent evaluation of each of these cognitive processes. In a study reported in this issue of Biological Psychiatry, Charpentier et al. (
      • Charpentier C.J.
      • Aylward J.
      • Roiser J.P.
      • Robinson O.J.
      Enhanced risk aversion, but not loss aversion, in unmedicated pathological anxiety.
      ) take a behavioral economic approach to decision making under risk in generalized anxiety disorder (GAD). Their primary goal is to distinguish between the effects of loss aversion and risk aversion (
      • Kahneman D.
      • Tversky A.
      Prospect theory: An analysis of decision under risk.
      ) on choice behavior. To understand these effects, let us consider the choice of whether to accept a mixed lottery—a lottery that offers a potential gain but also a potential loss. Figure 1A presents such a mixed lottery with 50% chance of winning $8 and 50% chance of losing $4. The subjective value, or utility, of the lottery depends not only on these amounts and probabilities but also on the individual’s attitudes toward these amounts and probabilities. Figure 1B–D presents the utility curves for gains and losses of three different individuals and marks the utilities of an $8 gain (green) and a $4 loss (red). Utility functions are typically concave in the gain domain and convex in the loss domain, indicating diminished sensitivity for increased value. In the gain domain, this diminished sensitivity is translated into risk aversion. Participant 1 (Figure 1B) exhibits slight risk aversion in the gain domain, obtaining just over 5 utility units from a gain of $8. This participant places the same weight on gains and on losses and thus expects the utility of a $4 loss to equal half of that of the $8 gain, with a negative sign. The lottery’s expected utility for this participant therefore is high, and she is likely to accept the lottery. Participant 2 (Figure 1C) exhibits a similar degree of risk aversion. For this participant, however, losses loom larger than gains, such that his negative utility from a $4 loss is quite high, leading to an overall negative expected utility for the lottery. Thus, increased loss aversion may drive reduced risk taking in this participant compared with Participant 1. Participant 3 (Figure 1D) is also less likely to accept the lottery, but for a different reason. Like Participant 1, Participant 3 weighs gains and losses equally. This participant, however, exhibits increased risk aversion (reflected in a more curved utility function in the gain domain), which decreases the utility of the gain and reduces the overall desirability of the lottery.
      Figure 1.
      Figure 1Both risk aversion and loss aversion could affect the utility of a mixed lottery. (A) An example of a mixed lottery, offering 50% chance of winning $8 and 50% chance of losing $4. (B–D) Examples of three hypothetical participants considering whether to accept the mixed lottery. The graphs plot the utility curve of each subject for monetary gains and losses. The y axes depict the utility of the gain (green) and the loss (red) in arbitrary units. Participant 1 (B) has slight risk aversion but no loss aversion, Participant 2 (C) shows similar risk aversion but also loss aversion, and Participant 3 (D) shows no loss aversion but stronger risk aversion compared with the other participants. The overall utility of the lottery is lower for Participants 2 and 3 compared with Participant 1, but for different reasons—either increased loss aversion (Participant 2) or increased risk aversion (Participant 3). Charpentier et al. (
      • Charpentier C.J.
      • Aylward J.
      • Roiser J.P.
      • Robinson O.J.
      Enhanced risk aversion, but not loss aversion, in unmedicated pathological anxiety.
      ) found heightened risk aversion, but not loss aversion, in individuals with pathological anxiety.
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      Linked Article

      • Enhanced Risk Aversion, But Not Loss Aversion, in Unmedicated Pathological Anxiety
        Biological PsychiatryVol. 81Issue 12
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          Anxiety disorders are associated with disruptions in both emotional processing and decision making. As a result, anxious individuals often make decisions that favor harm avoidance. However, this bias could be driven by enhanced aversion to uncertainty about the decision outcome (e.g., risk) or aversion to negative outcomes (e.g., loss). Distinguishing between these possibilities may provide a better cognitive understanding of anxiety disorders and hence inform treatment strategies.
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