Human economic choice as costly information processing

John Dickhaut, Vernon Smith, Baohua Xin, Aldo Rustichini

Research output: Contribution to journalArticlepeer-review

7 Scopus citations

Abstract

We develop and test a model that provides a unified account of the neural processes underlying behavior in a classical economic choice task. The model describes in a stylized way brain processes engaged in evaluating information provided by the experimental stimuli, and produces a consistent account of several important features of the decision process in different environments: e.g., when the probability is specified or not (ambiguous choices). These features include the choices made, the time to decide, the error rate in choice, and the patterns of neural activation.The model predicts that the further two stimuli are from each other in utility space, the shorter the reaction time will be, fewer errors in choice will be made, and less neural activation will be required to make the choice. The model also predicts that choices with ambiguity can be made more quickly and will require reduced neural activation in the horizontal intra-parietal sulcus than for choices with risk. Also, everything else being equal a larger value of certainty option in the choice will induce larger neural activation, and less experience on the part of the subject making choices will induce larger activation. We provide experimental evidence that is consistent with these predictions.

Original languageEnglish (US)
Pages (from-to)206-221
Number of pages16
JournalJournal of Economic Behavior and Organization
Volume94
DOIs
StatePublished - Oct 2013

Bibliographical note

Funding Information:
Baohua Xin acknowledges financial support from the Rotman School of Management at the University of Toronto, and Aldo Rustichini thanks the National Science Foundation for financial support through grant number SES-0924896.

Keywords

  • Economic choices
  • Experimental Economics
  • Neuroeconomics

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