Humans are generally risk averse: they prefer options with smaller certain outcomes over those with larger uncertain ones. This risk aversion is classically explained with a concave utility function, meaning that successive increases in monetary payoffs should increase subjective valuations by progressively smaller amounts. Here, we provide neural and behavioural evidence that risk aversion may also arise from a purely perceptual bias: The noisy logarithmic coding of numerical magnitudes can lead individuals to underestimate the size of larger monetary payoffs, leading to apparent risk aversion even when subjective valuation increases linearly with the estimated amount. A formal model of this process predicts that risk aversion should systematically increase when individuals represent numerical magnitudes more noisily. We confirmed this prediction by measuring both the mental and neural acuity of magnitude representations during a purely perceptual task and relating these measures to individual risk attitudes during separate financial decisions. Computational model fitting suggested that subjects based both types of choices on similar mental magnitude representations, with correlated precision across the separate perceptual and risky choices. Increased stimulus noise due to the presentation format of risky outcomes led to increased risk aversion, just as predicted by the model. The precision of the underlying neural magnitude representations was estimated with a numerical population receptive field model fitted to the fMRI data of the perceptual task. Subjects with more precise magnitude representations in parietal cortex indeed showed less variable behaviour and less risk-aversion in the separate financial choices. Our results highlight that individual patterns of economic behaviour may, at least partially, be determined by capacity limitations in perceptual processing rather than by processes that assign subjective values to monetary rewards.

Humans are generally risk averse: they prefer options with smaller certain outcomes over those with larger uncertain ones. This risk aversion is classically explained with a concave utility function, meaning that successive increases in monetary payoffs should increase subjective valuations by progressively smaller amounts. Here, we provide neural and behavioural evidence that risk aversion may also arise from a purely perceptual bias: The noisy logarithmic coding of numerical magnitudes can lead individuals to underestimate the size of larger monetary payoffs, leading to apparent risk aversion even when subjective valuation increases linearly with the estimated amount. A formal model of this process predicts that risk aversion should systematically increase when individuals represent numerical magnitudes more noisily. We confirmed this prediction by measuring both the mental and neural acuity of magnitude representations during a purely perceptual task and relating these measures to individual risk attitudes during separate financial decisions. Computational model fitting suggested that subjects based both types of choices on similar mental magnitude representations, with correlated precision across the separate perceptual and risky choices. Increased stimulus noise due to the presentation format of risky outcomes led to increased risk aversion, just as predicted by the model. The precision of the underlying neural magnitude representations was estimated with a numerical population receptive field model fitted to the fMRI data of the perceptual task. Subjects with more precise magnitude representations in parietal cortex indeed showed less variable behaviour and less risk-aversion in the separate financial choices. Our results highlight that individual patterns of economic behaviour may, at least partially, be determined by capacity limitations in perceptual processing rather than by processes that assign subjective values to monetary rewards.

Humans are generally risk averse, preferring smaller certain over larger uncertain outcomes.Economic theories usually explain this by assuming concave utility functions. Here, we provide evidence that risk aversion may also arise from relative underestimation of larger monetary payoffs, a perceptual bias rooted in the noisy logarithmic coding of numerical magnitudes. We confirmed this with psychophysics and fMRI, by measuring behavioural and neural acuity of magnitude representations during a magnitude perception task and relating these measures to risk attitudes during separate risky financial decisions. Computational modelling suggested that participants employ similar mental magnitude representations in both tasks, with correlated precision across perceptual and risky choices. Participants with more precise magnitude representations in parietal cortex showed less variable behaviour and less risk-aversion. Our results highlight that at least some individual characteristics of economic behaviour may reflect capacity limitations in perceptual processing rather than processes that assign subjective values to monetary outcomes.