Contributions in Merlin

Schizophrenia is associated with fronto-temporal dysconnectivity, but it is not clear whether this is a risk factor for the disorder or is a consequence of the established illness. The aim of the present study was to use fMRI to investigate fronto-temporal connectivity in subjects with prodromal signs of schizophrenia using the Hayling Sentence Completion Task (HSCT). Thirty participants, 15 with an at risk mental state (ARMS) and 15 healthy controls were scanned whilst completing 80 sentence stems. The congruency and constraint of sentences varied across trials. Dynamic causal modelling (DCM) and Bayesian model selection (BMS) were used to compare alternative models of connectivity in a task related network. During the HSCT ARMS subjects did not differ from Healthy Controls in terms of fronto-temporal activation, i.e. there was neither a main effect of group nor a group-by-task interaction. However, there was both a significant main effect of group and a significant interaction in the anterior cingulate cortex (ACC), with greater ACC activity in the ARMS subjects. A systematic BMS procedure among 14 alternative DCMs including the ACC, middle frontal, and middle temporal gyri revealed intact task-dependent modulation of fronto-temporal effective connectivity in the ARMS group. However, ARMS subjects showed increased endogenous connection strength between the ACC and the middle temporal gyrus relative to healthy controls. Although task related fronto-temporal integration in the ARMS was intact, this may depend on increased engagement of the ACC which was not observed in healthy control subjects.

Among the most puzzling observations on the euro money market are the discount in the weekly refinancing operations, the more aggressive bidding under uncertainty, the temporary flatness of bid schedules, and the development of interest rate spreads. To explain these observations, we consider a standard divisible-good auction with either uniform or discriminatory pricing, and place it in the context of a secondary market for interbank credit. The analysis links the empirical evidence to the endogenous choice of collateral in credit transactions. We also discuss the Eurosystem's preference for the discriminatory auction, the remuneration of reserves, and the impact of the recent market turmoil.

The role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists. A popular way to measure trust at the individual level is the so-called “investment game” (Berg, Dickhaut, and McCabe, 1995). It has been widely noted, however, that risk attitudes can also affect decisions in this game, and thus in principle confound inferences about trust. We provide novel evidence, shedding light on the role of risk attitudes for trusting decisions. To the best of our knowledge, our data are the first rigorous evidence that (i) aggregate investment distributions differ significantly between trust and risk environments, and (ii) risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games. Our results are convergent evidence that trust decisions are not tightly connected to a person’s risk attitudes, and they lend support to the “trust” interpretation of decisions in investment games.

The integration of economics and psychology has created a vibrant and fruitful emerging field of study. The essays in Economics and Psychology take a broad view of the interface between these two disciplines, going beyond the usual focus on "behavioral economics." As documented in this volume, the influence of psychology on economics has been responsible for a view of human behavior that calls into question the assumption of complete rationality (and raises the possibility of altruistic acts), the acceptance of experiments as a valid method of economic research, and the idea that utility or well-being can be measured. The contributors, all leading researchers in the field, offer state-of-the-art discussions of such topics as pro-social behavior and the role of conditional cooperation and trust, happiness research as an empirical tool, the potential of neuroeconomics as a way to deepen understanding of individual decision making, and procedural utility as a concept that captures the well-being people derive directly from the processes and conditions leading to outcomes. Taken together, the essays in Economics and Psychology offer an assessment of where this new interdisciplinary field stands and what directions are most promising for future research, providing a useful guide for economists, psychologists, and social scientists.

Interplay between the cerebral hemispheres is vital for coordinating perception and behavior. One influential account holds that the hemispheres engage in rivalry, each inhibiting the other. In the somatosensory domain, a seminal paper claimed to demonstrate such interhemispheric rivalry, reporting improved tactile detection sensitivity on the right hand after transcranial magnetic stimulation (TMS) to the right parietal lobe (Seyal, Ro, & Rafal, 1995). Such improvement in tactile detection ipsilateral to TMS could follow from interhemispheric rivalry, if one assumes that TMS disrupted cortical processing under the coil and thereby released the other hemisphere from inhibition. Here we extended the study by Seyal et al. (1995) to determine the effects of right parietal TMS on tactile processing for either hand, rather than only the ipsilateral hand. We performed two experiments applying TMS in the context of median-nerve stimulation; one experiment required somatosensory detection, the second somatosensory intensity discrimination. We found different TMS effects on detection versus discrimination, but neither set of results followed the prediction from hemispheric rivalry that enhanced performance for one hand should invariably be associated with impaired performance for the other hand, and vice-versa. Our results argue against a strict rivalry interpretation, instead suggesting that parietal TMS can provide a pedestal-like increment in somatosensory response.

Difficulties in social cognition are well recognized in individuals with autism spectrum conditions (henceforth 'autism'). Here we focus on one crucial aspect of social cognition: the ability to empathize with the feelings of another. In contrast to theory of mind, a capacity that has often been observed to be impaired in individuals with autism, much less is known about the capacity of individuals with autism for affect sharing. Based on previous data suggesting that empathy deficits in autism are a function of interoceptive deficits related to alexithymia, we aimed to investigate empathic brain responses in autistic and control participants with high and low degrees of alexithymia. Using functional magnetic resonance imaging, we measured empathic brain responses with an 'empathy for pain' paradigm assessing empathic brain responses in a real-life social setting that does not rely on attention to, or recognition of, facial affect cues. Confirming previous findings, empathic brain responses to the suffering of others were associated with increased activation in left anterior insula and the strength of this signal was predictive of the degree of alexithymia in both autistic and control groups but did not vary as a function of group. Importantly, there was no difference in the degree of empathy between autistic and control groups after accounting for alexithymia. These findings suggest that empathy deficits observed in autism may be due to the large comorbidity between alexithymic traits and autism, rather than representing a necessary feature of the social impairments in autism.

We explore the link between portfolio home bias and consumption risk sharing among Italian regions using household-level information on consumption, income and portfolio holdings. Since equity funds are typically diversified at the national or international level, we use data on equity fund ownership to proxy for regional home bias. Cross-regional patterns of equity fund ownership are qualitatively consistent with simple portfolio theory: regions with more asymmetric business cycles are more diversified because they have higher fund participation rates (the extensive margin of diversification) and higher average holdings of equity funds (diversification’s intensive margin). Also, fund holdings increase with the exposure of non-tradable income components (such as labor or entrepreneurial income) to regional shocks. Finally, interregional consumption risk sharing increases with fund holdings and this effect seems strongest when participation is widespread. Increased equity market participation could substantially improve interregional risk sharing.

Strong reciprocity is characterized by the willingness to altruistically reward cooperative acts and to altruistically punish norm-violating, defecting behaviours. Recent evidence suggests that subtle reputation cues, such as eyes staring at subjects during their choices, may enhance prosocial behaviour. Thus, in principle, strong reciprocity could also be affected by eye cues. We investigate the impact of eye cues on trustees' altruistic behaviour in a trust game and find zero effect. Neither the subjects who are classified as prosocial nor the subjects who are classified as selfish respond to these cues. In sharp contrast to the irrelevance of subtle reputation cues for strong reciprocity, we find a large effect of explicit, pecuniary reputation incentives on the trustees' prosociality. Trustees who can acquire a good reputation that benefits them in future interactions honour trust much more than trustees who cannot build a good reputation. These results cast doubt on hypotheses suggesting that strong reciprocity is easily malleable by implicit reputation cues not backed by explicit reputation incentives.