Negative Contextual Valence Unmasks Altered Counterfactual Decision-Making in Major Depressive Disorder

Background: While counterfactual thinking ('what could have been') guides adaptive decision-making, it remains unclear how this process is altered by the negative biases and motivational deficits characteristic of Major Depressive Disorder (MDD). Methods: We used a sequential economic decision-making task designed to emulate a volatile stock market to assess choice behavior in adults with or without MDD (Total N=178); a subset of these participants completed the task during functional MRI (N=53). The task allowed participants to make either positive ('invest') or negative ('short') bets, under either positive or negative contextual valence, defined by whether the immediately preceding stock price change was positive or negative. Fictive errors were defined as the difference between realized and best-possible outcomes. Results: Across the full cohort, group differences in behavioral adjustments to fictive error signals emerged exclusively under negative contextual valence, when stock prices decreased. Compared with controls, participants with MDD showed heightened sensitivity to invest-and-loss fictive errors, reflected in a greater reduction in subsequent bets (interaction beta = -0.63, p < .001), but blunted adjustment to short-and-gain fictive errors (beta = -0.86, p < .001). In the imaging cohort, blunted short-and-gain adjustment was accompanied by heightened anterior cingulate (ACC) activity and attenuated ventromedial prefrontal (vmPFC)-to-ACC coupling in MDD. vmPFC activity following negative market returns also tracked depression symptom severity. Conclusions: Depression selectively disrupts the use of counterfactual outcomes to guide adaptive choice under negative contextual valence, implicating altered frontocingulate function in maladaptive decision-making.