Dynamic prospect theory - two core economic decision theories coexist in the gambling behavior of monkeys

Research in behavioral economics and reinforcement learning has given rise to two influential theories describing human economic choice under uncertainty. The first, prospect theory, assumes that decision-makers use static mathematical functions, utility and probability weighting, to calculate the values of alternatives. The second, reinforcement learning theory, posits that dynamic mathematical functions update the values of alternatives based on experience through reward prediction error (RPE). To date, these theories have been examined in isolation without reference to one another. Therefore, it remains unclear whether RPE affects a decision-makers utility and/or probability weighting functions, or whether these functions are indeed static as in prospect theory. Here, we propose a dynamic prospect theory model that combines prospect theory and RPE, and test this combined model using choice data on gambling behavior of captive macaques. We found that under standard prospect theory, monkeys, like humans, had a concave utility function. Unlike humans, monkeys exhibited a concave, rather than inverse-S shaped, probability weighting function. Our dynamic prospect theory model revealed that probability distortions, not the utility of rewards, solely and systematically varied with RPE: after a positive RPE, the estimated probability weighting functions became more concave, suggesting more optimistic belief about receiving rewards and over-weighted subjective probabilities at all probability levels. Thus, the probability perceptions in laboratory monkeys are not static even after extensive training, and are governed by a dynamic function well captured by the algorithmic feature of reinforcement learning. This novel evidence supports combining these two major theories to capture choice behavior under uncertainty. Significance statementWe propose and test a new decision theory under uncertainty by combining pre-existing two influential theories in the neuroeconomics: prospect theory from economics and prediction error theory from reinforcement learning. Collecting a large dataset (over 60,000 gambling decisions) from laboratory monkeys enables us to test the hybrid model of these two core decision theories reliably. Our results showed over-weighted subjective probabilities at all probability levels after lucky win, indicating that positive prediction error systematically bias decision-makers more optimistically about receiving rewards. This trial-by-trial prediction-error dynamics in probability perception provides outperformed performance of the model compared to the standard static prospect theory. Thus, both static and dynamic elements coexist in monkeys risky decision-making, an evidence contradicting the assumption of prospect theory.